Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

STOKE-ON-TRENT CORPORATION BILL [Lords]

UNIVERSITY OF LONDON, KING'S COLLEGE (LEASE) BILL [Lords]

Bills read the Third time and passed, without Amendment.

CORNWALL RIVER AUTHORITY BILL

MERSEY TUNNEL BILL

Bills, as amended considered; to be read the Third time.

WELLINGTON ESTATE BILL [Lords]

Bill read a Second time and committed.

Oral Answers to Questions — AGRICULTURE, FISHERIES AND FOOD

Consumer Protection

Mr. Molloy: asked the Minister of Agriculture, Fisheries and Food if, in his forthcoming legislation, he will propose re-establishing a consumer protection council.

The Minister of Agriculture, Fisheries and Food (Mr. James Prior): I have no such proposal in prospect.

Mr. Molloy: With respect the right hon. Gentleman ought to have. Is he aware that despite the cuts in sugar and

milk prices these commodities are still higher in price than they were in 1970, the infamous promise notwithstanding? Is he further aware that there has been a considerable rise in the prices of a vast range of household goods and commodities? Does he not think that people are entitled to value and that no trader with confidence in his goods would object to the establishment of a consumer council?

Mr. Prior: I never thought that the consumer council had done anything to bring prices down. As for the party opposite, it never did anything at all.

Mr. Buchan: Will the right hon. Gentleman reconsider that reply? He has an opportunity in the Agriculture (Miscellaneous Provisions) Bill to bring in such a council and we will support it. Is he aware that if he brings in such a council to deal with prices, he will discover that the cut in sugar prices for example has led in some cases to sweet prices being increased by 200 per cent. to 300 per cent?

Mr. Prior: I had thought that hon. Gentlemen opposite would welcome a reduction in the price of food but they do not seem to do so.

European Economic Community

Mr. Grylls: asked the Minister of Agriculture, Fisheries and Food what recent representations he has received from horticulturists with regard to Great Britain's joining the European Economic Community.

Mr. Prior: I have received a general policy statement from the National Famers' Union. My officials continue to maintain close contact with horticultural interests on a wide range of matters relating to entry into the E.E.C.

Mr. Grylls: While thanking my right hon. Friend for that answer may I ask him to note that despite some initial misgivings about the E.E.C, the majority of environmental horticulturists in my constituency now believe that they have excellent opportunities for increasing their sales in the Community?

Mr. Prior: I am delighted to have that assurance. There has been a change in the mood of the horticulture industry in the last few months. There are still some problems ahead of us but these


can be looked after as we go on, particularly by means of compensation for apple and pear growers.

Sir D. Walker-Smith: Can my right hon. Friend say what progress has been made in his examination of possible methods of compensating horticulturists, particularly growers of tomatoes and cucumbers, to whom he referred in answer to Questions by me in the House some months ago?

Mr. Prior: The National Farmers' Union has now made definite proposals on apples and pears. At the moment we do not see any need to compensate efficient growers of tomatoes and cucumbers but we may have to take action as time goes on to encourage them to switch their production into other commodities. For the moment we feel that they have a good living in front of them.

Mr. Mackie: Is the right hon. Gentleman aware that flower growers are a little worried about the lack of information on value-added tax and how it will affect the industry? Can he give us some information?

Mr. Prior: The hon. Gentleman had better wait until a little later this afternoon.

Mr. Deakins: asked the Minister of Agriculture, Fisheries and Food by what European Economic Community body the level of United Kingdom farm commodity prices for the fat stock guarantees year 1973–74 will have to be approved.

Mr. Prior: United Kingdom Ministers will continue to be responsible for the price determinations subject to the terms of Article 54 of the Act annexed to the Treaty of Accession.

Mr. Deakins: Will the right hon. Gentleman assure us that the pace of adaptation to the prices of the Community over the next 25 years will be our pace and that there will be noveto by any Community body, particularly with regard to the removal of commodities under the 1957 Act?

Mr. Prior: Under Article 54 increases in guaranteed prices may take place, but subject to a limit each year of one-sixth of the difference between the guaranteed price and the E.E.C. common price, plus a percentage increase equal to the per-

cent age increase made in the E.E.C. common price for that year. We could reach a stage where our prices go above the guaranteed price, and at that stage the guarantee under the 1957 Act could be phased out.

Mr. Peart: Will the Minister confirm the report in today's Press that his Department and the Government have made representations to the Community on the effect of high cereal prices on feed costs?

Mr. Prior: This is part of the consultation which has been taking place over a period of time in which we are telling the Community our views on its prices in the same way that it is able to consult us on what we have been doing.

Mr. Rost: asked the Minister of Agriculture, Fisheries and Food through what institutions, in the context of the European Economic Community's horticultural marketing regulations, member countries of the European Economic Community make available to producer organisations low credit loans to cover part of the costs of operating market withdrawals.

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Anthony Stodart): No such loans have been made in Belgium, France and the Netherlands. Some have been made in Germany and Italy through the Ministries of Agriculture.

Mr. Rost: I thank my hon. Friend for that reply. Will he please ensure that this matter is looked into and that the horticulture and market gardening industry can be made fully aware of the implications of our joining the Common Market with respect to these loans?

Mr. Stodart: Yes, Sir, I shall certainly see to it. I would add that the Community is not using very much the method that my hon. Friend has mentioned.

19. Mr. Hicks: asked the Minister of Agriculture, Fisheries and Food what steps he has taken to ensure that horticulturists and, in particular, merchants of horticultural produce understand the rôle of producer groups in the European Economic Community and the benefits which depend on forming them when the


United Kingdom becomes a full member of the Community.

Mr. Prior: Discussions have been held with representatives of producers and trade interests. As my hon. Friend will now have seen from the 1972 Annual Review White Paper, further consultations are being arranged.

Mr. Hicks: Will my right hon. Friend consider taking immediate and practical steps to improve the industry's understanding of the vital need for greater co-operation in the light of these new developments?

Mr. Raphael Tuck: We cannot hear a word.

Mr. Prior: As soon as we know exactly what the Community is proposing, we shall give it all the publicity that we can. Meanwhile, I shall seek an early opportunity to try to put to horticulturists the points that my hon. Friend suggests.

Sir Robin Turton: asked the Minister of Agriculture, Fisheries and Food what steps he is taking to prevent imports of pigs and of pigmeat entering the United Kingdom from countries of the European Economic Community which exercise no control of swine fever on their farms.

Mr. Anthony Stodart: The Accession Treaty authorises the continuance of our present import rules for live pigs. For pigmeat we shall continue to take the necessary protective measures which we are confident can be justified under the provisions of the relevant directive.

Sir Robin Turton: Is my hon. Friend aware that there is general concern that Article 104 of the Treaty of Accession is inadequate protection for the pig industry and that, after 1977, no protection is afforded against animals infected with swine fever being imported into this country?

Mr. Stodart: The five-year derogation which we got on foot-and-mouth disease protects us from swine fever as well.

Mr. Hastings: Is my hon. Friend aware that health regulations appear to be being used increasingly within the Common Market as a form of protection and that this applies not only to live-

stock but to horticultural produce? Are the Government aware of this and are they protesting as hard as they should?

Mr. Stodart: I think that my hon. Friend has a later Question on that subject.

Mr. Brocklebank-Fowler: asked the Minister of Agriculture, Fisheries and Food what progress has been made towards a computerised system of recording market prices for horticultural produce in order to ensure immediate and accurate information within the enlarged Community.

Mr. Anthony Stodart: My Department provides weekly market reports of wholesale prices for a wide range of horticultural produce sold in the nine principal markets in England and Wales. There are no plans at present for putting this work on to computers.

Mr. Brocklebank-Fowler: Is my hon. Friend aware that there is criticism of the system of recording market prices in this country particularly compared with the practice in France? Unless the machinery in this country is improved, it will be extremely difficult for the Minister to keep his assurance to growers that immediate action will be taken to act promptly to avoid disruption in the Community.

Mr. Stodart: It is true that in the Community regulations demand daily prices for items subject to intervention during the marketing season. The present arrangements will be all right for our own purposes. I am always ready to consider an improvement. We are looking at the future requirements for giving price data and market intelligence to the Community.

Mr. John Wells: Is my hon. Friend aware that the French sample over 20 markets daily whereas we sample only nine? Surely this should be done by computer and should be put on a computer before we join the E.E.C.

Mr. Stodart: Certainly the markets in the United Kingdom, on which this work will be done, are still to be agreed. I should point out that an experiment was made with a computer at Covent Garden. It was perfectly feasible and practical, but totally non-viable as few traders would use it. We hope to make progress in this sphere.

Food Prices

Mr. Mark Hughes: asked the Minister of Agriculture, Fisheries and Food what changes in the expenditure and consumption per head of retirement pensioners on meat, butter and milk took place between the fourth quarter of 1970 and 1971, respectively, or the latest date for which such figures are available.

Mr. Prior: As the answer includes a number of figures, I will, with permission, circulate them in the Official Report.

Mr. Hughes: In so far as the figures are likely to be those of the National Food Survey which are published by the right hon. Gentleman's Department, will the Minister accept in general terms that, despite the increase in pensions, the position that will be revealed is that butter consumption has gone down by one-quarter while expenditure on fat has increased by 25 per cent.; that while meat consumption has gone up slightly expenditure on meat has gone up sharply, and that milk consumption has gone down by 2 per cent. and the cost has gone up by 15 per cent.?

Mr. Prior: No, Sir, I certainly would not confirm the last of the hon. Gentleman's assertions. He is, broadly speaking, right about butter and carcase meat. It is interesting to note that there has been an increase in consumption of carcase meat as well as an increase in expenditure on it. For butter the trends are similar to those for the population as a whole.

Mr. Kinsey: My right hon. Friend will be aware that the 12-monthly review will help considerably. Will he continue to press upon the Government the necessity to resist exorbitant wage claims which put increasing pressures on pensioners?

Mr. Prior: There is no doubt that exorbitant wage claims are the largest single factor in price increases and, therefore, we all need to take whatever action we can to keep them down.

Mr. Peart: Is the Minister aware that old-age pensioners spend a large proportion of their income on food and that increases in food prices weigh heavily upon them? Is he also aware that under the present Administration "old age" is another term for "poverty", and that something must be done?

Mr. Prior: Of course that remark is the nonsense that the right hon. Gentleman knows it to be. What is more, the Conservative Party is the party that has agreed to an annual increase in pensions, which is more than the Opposition did.

Following is the information:

The National Food Survey data for pensioner households for the fourth quarters of 1970 and 1971 shows the following changes:

Commodity
Change in expenditure Per cent.
Change in consumption Per cent.


Carcase meat
+22·3
+3·5


Butter
+7
-29·7


All milk (including cream)
+10·8
No change

Mr. Carter: asked the Minister of Agriculture, Fisheries and Food by what percentage the cost of food has risen since 18th June, 1970, and what has been the average monthly increase over the past six months.

Mr. William Price: asked the Minister of Agriculture, Fisheries and Food what has been the increase in food prices since 18th June, 1970.

Mr. Prior: The latest available information about the increase in the Food Index since June, 1970, was given in my reply to the hon. Member for Birmingham, Northfield (Mr. Carter) on 29th February. The average monthly increase between July, 1971, and January, 1972, was rather less than 0·6 per cent.—[Vol. 832, c. 58–59.]

Mr. Carter: Is the right hon. Gentleman aware that that is a scandalous rate of increase—[Laughter.] But in connection with the recently announced cut in the price of milk what discussions did he have with his right hon. Friend the Secretary of State for Education and Science before the cut was announced? Does he not realise that the country as a whole would welcome this more as an opportunity to restore free milk in school?

Mr. Prior: My right hon. Friend was informed and, as one would expect, I have had discussions with my colleagues. I can tell the hon. Gentleman that my colleagues welcomed the cuts very much indeed, and I am sorry that the Opposition do not.

Mr. Farr: Would my right hon. Friend agree that not only have prices been relatively stable recently but also that the recent measures he has taken will have a marked effect in reducing the prices of certain food commodities?

Mr. Prior: Yes, Sir, that is true—and it is the Conservative Government which have cut these prices, S.E.T. and also purchase tax. I cannot remember a single case in which the Labour Government ever cut anything.

Mr. Peart: Will the Minister give an assurance that the Conservative Administration will not support the introduction of a value-added tax which will affect food prices?

Mr. Prior: We have already made it abundantly clear that food, other than those items of food on which the Labour Party put purchase tax, will be relieved of V.A.T. Perhaps the right hon. Gentleman should wait until a little later in the afternoon.

Dairy Herd

Mr. Scott-Hopkins: asked the Minister of Agriculture, Fisheries and Food what is the size of the dairy herd at the latest convenient date; and what increase he expects in heifers retained in the herd during 1972–73.

Mr. Anthony Stodart: At the December, 1971, Census—based partly on sample returns—there were 3,346,000 dairy cows in the United Kingdom. This is the first sign of expansion in the dairy herd. In line with that expansion I expect to see some increase in the number of dairy heifers entering the dairy herd in 1972–73.

Mr. Scott-Hopkins: I congratulate my hon. Friend on the first upturn in the level of the dairy herd for many years. What estimate has he made of the amount of milk which will go into the manufacturing industry and what increase in take-up of the butter market of the United Kingdom will come from herds in this country?

Mr. Stodart: My hon. Friend will get some idea of this from the fact that this year our butter market will be supplied to the extent of about 16 per cent. from home supplies compared with less than

10 per cent. some years ago. I am grateful to my hon. Friend for his first remark. The increase in the size of the dairy herd shows what the resolute policy of my right hon. Friend can do compared with the vacillation plus a mixture of caution and adventure which the righthon. Member for Working ton (Mr. Peart) used to display.

Forestry

Mr. David Clark: asked the Minister of Agriculture, Fisheries and Food when he now expects to publish his review of forestry.

Mr. Guy Barnett: asked the Minister of Agriculture, Fisheries and Food if he will now publish the report of the review recently undertaken in his Department of the future of forestry policy.

Mr. Anthony Stodart: My right hon. Friend will be making a statement between the Easter and Whitsun Recesses.

Mr. Clark: I thank the Minister for that reply. He will remember that on 16th November he promised to publish the review as soon as practicable. Does he realise that in the intervening period there has been considerable disquiet in the uplands areas about our entry into Europe and its effect upon farming and forestry? Will he confirm that the review will be published?

Mr. Stodart: I regret the delay since my original statement. This is an extremely complex inquiry involving many considerations. I accept to a limited degree what the hon. Gentleman has said about anxiety in the uplands areas, although I believe the balance is now being restored between what I regard as so important, and that is farming and forestry combined. There will be a publication.

Mr. Barnett: Is the Minister aware of the widespread public interest in this subject of those who use the countryside for recreation? Will he confirm that the report will be published and that there will be a debate on the subject in the House?

Mr. Stodart: The question of a debate is for a channel slightly above my level, but I will certainly draw the attention of


my right hon. Friend to this question. I confirm that there will be a publication.

Mr. Scott-Hopkins: Will my hon. Friend tell the House the acreage of Forestry Commission planting this year and the percentage of home-grown soft timber which is used in this country?

Mr. Stodart: Not, I am afraid, without notice.

Milk (Children)

Mr. Duffy: asked the Minister of Agriculture, Fisheries and Food if he will seek powers to equalise the charges for milk to 7 to 11-year-old school-children and the charges of milk of the same quality delivered by rounds men.

Mr. Anthony Stodart: No, Sir, I would not wish to discourage education authorities from providing milk to schoolchildren by enforcing a maximum price which might prevent them from recovering their reasonable expenses.

Mr. Duffy: Does the Minister accept that position even though it will mean that, when administrative and delivery costs are added to the retail price of milk, schoolchildren will be paying more than their mothers are paying for milk on the doorstep—and in some education areas much more by the summer—and although this growing divergence arises out of the Government's decision to deprive 7 to 11-year-old schoolchildren of free milk?

Mr. Stodart: As I said to the hon. Gentleman on the last occasion when he asked this question, it is perfectly possible for education authorities to buy milk at below the maximum price. It comes ill from the hon. Gentleman to criticise this scheme when his Government withdrew free milk from secondary school pupils and neither made provision for health needs nor allowed local authorities to provide milk and charge for it.

Mr. Emery: Will my hon. Friend point out to education authorities that under the powers of the Local Authorities (Goods and Services) Act they can purchase centrally and that there need be no worry about milk costing more than the retail price?

Mr. Stodart: I am grateful to my hon. Friend and I will look into his suggestion.

Horticulture (Prices)

Mr. Jeffrey Archer: asked the Minister of Agriculture, Fisheries and Food what price-watching machinery he plans to institute in order to act swiftly to deal with market disruption of horticultural produce.

Mr. Prior: This matter will be kept under review, but I am not at present persuaded of the need for additional machinery for official monitoring of prices in the horticultural sector since these prices can already be obtained at short notice whenever necessary.

Mr. Archer: Will my right hon. Friend explain the difference between commercial prices and prices in the horticultural industry at present given by the Ministry?

Mr. Prior: I am not certain that I understand the point my hon. Friend is making. We have a number of methods of assessing prices. At the end of each month we issue statistical information and each fortnight there is a bulletin describing retail market prices. The tables issued at the end of each week are probably the most reliable and they are based on the commercial price and not the retail price.

Mr. Buchan: Surely the right hon. Gentleman should easily get the point which his hon. Friend is making. He is saying that there is no control over horticultural prices, as there is no control over other prices.

Mr. Archer: No, I am not

Mr. Buchan: What the hon. Gentleman is trying to say to his right hon. Friend is that not only he but the people of the country are getting sick of this.

Mr. Prior: The hon. Gentleman of course never gets any point correctly. Even if he gets a point correctly, his Government certainly did not when they were in office.

Mr. John Wells: Is my right hon. Friend aware that my hon. Friend the Member for Louth (Mr. Jeffrey Archer) is on an entirely different point from that suggested by the hon. Member for Renfrew, West (Mr. Buchan)? My hon. Friend is saying that horticultural prices are deplorably low and that British horticulturists need a good bit of support.

Mr. Prior: British horticulturists do a jolly good job in supplying us with large quantities of fresh food at reasonable prices. I confirm what my hon. Friend has said.

Tree-Planting Year

Mr. Sydney Chapman: asked the Minister of Agriculture, Fisheries and Food what rôle he is planning for his Department in general, and the Forestry Commission in particular, in relation to the Plant a Tree Year in 1973.

Mr. Anthony Stodart: My Department and the Forestry Commission will be in very close touch with the Department of the Environment about the part they can appropriately play in the success of the Tree Planting Year, but it is too soon to say exactly what form this might take.

Mr. Chapman: I thank my hon. Friend for that encouraging reply. In agreeing to this close co-operation, will either my hon. Friend or his right hon. Friend consider taking a place on the committee set up by the Secretary of State to advise on encouraging this excellent venture?

Mr. Stodart: Since I am always rather reluctant to sit on Committees, I am hesitant to express any glowing enthusiasm for the suggestion but I will bear my hon. Friend's point in mind.

Mr. Dalyell: If the hon. Gentleman cannot say the exact form this will take, can he say what general form it will take?

Mr. Stodart: It will be part of our job to see that the campaign catches on in the countryside; this is a major part of it. In that case we shall try to see that the support of the N.F.U. is enlisted.

Farm Wages

Mr. Ashton: asked the Minister of Agriculture, Fisheries and Food what estimates he has made of the cost of wages as a percentage of total farming costs today compared with 10 years ago.

Mr. Prior: Labour costs were 22 per cent. of total farming costs in 1961–62 and are forecast to be 19 per cent. in 1971–72.

Mr. Ashton: In view of the magnificent productivity record, why are our farm workers' wages so shockingly low?

Is the right hon. Gentleman aware that this morning I received from him a letter saying that in the last Price Review he had given farmers 50 per cent. more than was necessary to recoup their increased costs? Will he tell farmers to give some of this money to the farm workers to lift their £16 minimum wage, which is a disgrace?

Mr. Prior: If hon. Gentlemen on the Opposition side had done more to help the farming industry when they were in office, farm workers might now be better of. Farm workers' wages are determined by the Agricultural Wages Board, which consists of equal numbers of workers and farmers with a number of independent members. It is far better left to the members of the board than for hon. Members in this House to interfere.

Mr. Scott-Hopkins: Would not my hon. Friend agree that only this year farm workers received an increase in pay and, although they probably deserve more, must it not be borne in mind that over 90 per cent. of them have average earnings of more than £20 a week?

Mr. Prior: The average earnings in 1971–72 were nearly £22 a week and there are also considerable benefits in kind which are not taken into account.

Mr. Alfred Morris: Is the Minister aware that many of the recent replies about farm workers' wages have been disquieting? Will he not agree that there should now be a substantial increase in agricultural wages if farm workers are to break out of the poverty trap created for low-paid workers by the present Government?

Mr. Prior: The hon. Gentleman, as usual, does his case no good by exaggeration. He must realise that, unless prices are to be increased, we cannot pay increased wages without extra production. Hon. Members opposite are always going on about prices increasing. However, they do not say what should be done about the other side of the problem.

Toxic Waste (Sea Damping)

Mr. Roy Hughes: asked the Minister of Agriculture, Fisheries and Food (1) if, after considering the application from Imperial Chemical Industries to dump 90,000 gallons of arsenic waste


into the Bristol Channel, he will request the firm first to remove the small proportion of arsenic trioxide before the waste is dumped under the voluntary arrangements made by him;
(2) when he expects to make a decision about the application from Imperial Chemical Industries to dump 90,000 gallons of arsenic waste into the Bristol Channel.

Mr. Anthony Stodart: My Department has agreed, subject to certain conditions of disposal, to the dumping over a period of 12 months of this solution which contains a very small proportion of arsenic trioxide. I am advised that this operation will not be harmful to consumers or fisheries. Removal of the arsenic trioxide before disposal would not be warranted.

Mr. Hughes: Will the hon. Gentleman appreciate that many experts do not accept his point of view? Does he not agree, therefore, that he should take a firmer line and that, although the removal of arsenic trioxide may be more costly, people's health and well-being are far more important than the narrow pursuit of profit?

Mr. Stodart: The waste contains no more than between 1 and 4 per cent. of arsenic trioxide. The conditions for dumping are that the solution must be mixed with sewage sludge, the vessel carrying such material must move at a specified rate and workers must wear protective clothing. These are considerable safeguards.

Mr. Peter Mills: Will my hon. Friend bear in mind that this is a serious problem for such beautiful holiday resorts as Clovelly and Westward Ho? Will he ask those concerned to move their slops elsewhere?

Mr. Stodart: As I have said, this has been done after agreement with the fisheries departments, and it is an area in which monitoring is being done.

Mr. Pardoe: Will the hon. Gentleman say why it is necessary for any firm to dump any arsenic waste, of whatever solution and quantity, in the Bristol Channel? By whom was the hon. Gentleman advised that this would not be harmful? How much is the firm paying for the benefit of getting rid of its waste in this way?

Mr. Stodart: I cannot answer the hon. Gentleman's last question. I am advised that this is all strictly within the terms of the Oslo Convention, which my right hon. Friend signed recently, by which arsenic requires special care where it is present in significant quantities. In fact, it is not in this case.

Mr. Dalyell: asked the Minister of Agriculture, Fisheries and Food when he hopes to bring forward legislation on the dumping of toxic wastes in the North Sea.

Mr. Anthony Stodart: I would refer the hon. Member to my right hon. Friend's reply to his Question on 8th March when he said that the United Kingdom will take power to control dumping at sea as soon as possible.—[Vol. 832, c. 359.]

Mr. Dalyell: Has there been any Government thinking on the question of penalties since 8th March?

Mr. Stodart: Not as far as I am aware.

Food Distribution Costs

Mr. Dykes: asked the Minister of Agriculture, Fisheries and Food what examination has been made within his Department since June, 1970, of ways in which British food distribution costs could be cut so as to exert a downward effect on final retail food prices.

Mr. Prior: This is primarily a matter for the distributive industry, which is generally accepted to operate at a high level of efficiency. Costs have been reduced by the Government action on selective employment tax and other taxes.

Mr. Dykes: I thank my right hon. Friend for that answer, and I immediately pay tribute to the general efficiency of the food distribution sector, especially in comparison with many other European countries. But will my right hon. Friend undertake to look at this again since there is evidence that excessive transport costs, seasonal effects and the construction of the distribution sector mean that in many cases food prices to the housewife will be more than they need be?

Mr. Prior: One is looking constantly at this type of question. Certainly I will look at it again. We know that factors


like transport and other ancillary trades have contributed considerably to the increase in costs over recent years.

Mr. Pavitt: Does the Minister accept that the retail distribution by large hypermarkets outside towns creates problems other than those of the cost of the commodity to the consumer? In considering developments of this kind, will the right hon. Gentleman ensure that his Department co-ordinates with the Department of the Environment to ensure that the social consequences are not bad for the community?

Mr. Prior: Certainly, and I am in close touch with my right hon. Friend the Secretary of State for the Environment about this. Recently the Government have published guidance to local authorities and others on the subject of hypermarkets. We have to balance the social considerations with the undoubted economic advantages.

Cattle (Exports to France)

Mr. John Wells: asked the Minister of Agriculture, Fisheries and Food what representations he has had from the Sussex Cattle Breeders Society about exporting cattle to France; and what reply he has sent.

Mr. Anthony Stodart: My right hon. Friend has received letters on this subject both from the society and from my hon. Friend himself, complaining about the restrictions placed by France on the establishment of new breeds.
These restrictions are part of the general French policy on cattle breeding and in no way discriminate against the United Kingdom. However, I am consulting our Embassy in Paris as to whether it can help. I shall be replying similarly to the society.

Mr. Wells: Is my hon. Friend aware that the French were very happy to receive these cattle and then changed their minds? In view of my right hon. Friend's liberalisation policy of receiving European cattle into this country, is it not about time that the French behaved like good Europeans?

Mr. Stodart: Our policy of liberalisation benefits our own livestock industry most. I hope very much that the efforts at the Paris salon, which have been

splendid on the whole, will help to let the French see the advantages of our breeds.

Mr. Mackie: Does the Minister think that our Ambassador in France, who when Minister of Agriculture kept out French cattle from this country for 10 years, will have a lot of influence now in France?

Mr. Stodart: I think so. I realise with what interest the hon. Gentleman speaks.

Mr. Bryant Godman Irvine: Does my hon. Friend appreciate that a great many Sussex breeders are keenly interested in the action that he is taking in this matter?

Mr. Stodart: I am certain that if the Sussex breed will put on as good a show as the Galloway breed, it will do very well.

Sows (Iron Maiden Device)

Mr. Burden: asked the Minister of Agriculture, Fisheries and Food if he will take immediate steps to ban the use of the Iron Maiden, in which sows are confined and in which they are unable to walk, turn around, scratch or groom themselves.

Mr. Golding: asked the Minister of Agriculture, Fisheries and Food if he will take steps to forbid the use of the Iron Maiden, a tubular steel device which keeps a nursing sow fettered to the ground from four to seven weeks.

Mr. Anthony Stodart: No, Sir. The term "Iron Maiden" has been used by the Press to describe the Protect a system for sows. This is an acceptable form of tethering under proper management.

Mr. Burden: Does my hon. Friend realise that the manufacturers of this contraption have stated that it can be inhumane unless it is administered by very efficient stockmen and is under constant supervision? No one, not even my hon. Friend, can believe that the supervision is such that it takes place at all times, including during the night. In view of the adequacy of sow stalls, why cannot this contraption be banned?

Mr. Stodart: I understand the anxiety of my hon. Friend and of very many others. However, I must point out that the Protect a system allows more freedom of movement than used to take place in the traditional far rowing crate which was


in existence 30 years ago and that tethering outside has been going on for generations. It is a system which depends on good management, and there are factors on the other side which one must consider in trying to come to a balanced judgment.

Mr. Golding: Is the hon. Gentleman aware that good management is not always present? In view of that, is the hon. Gentleman further aware that representations are being made to the effect that this is a very cruel practice and that there will be bitter disappointment that he refuses to do anything about it?

Mr. Stodart: I can assure the hon. Gentleman that we keep a very close eye on this system. I have received detailed reports on it from our veterinary officers, none of which has been adverse.

Mr. Jessel: Going back to the wording of the Question, may I ask how a sow can groom itself?

Mr. Stodart: It is by no means mandatory that it should be able to do so.

Mr. Molloy: Does the hon. Gentleman accept that there is a widespread feeling of revulsion and abhorrence about this practice and that many people believe that the only way to compel the bringing about of a decent alternative is for the hon. Gentleman to have the courage to outlaw this barbarous practice?

Mr. Stodart: I know the hon. Gentleman's view on this. He led a delegation to see me and we had a long talk about it. But I am afraid that, despite the photograph which has been widely circulated and which I think, with respect, tended to make things a good deal worse than they need have been, I cannot accept what he says.

Food (Date Marking)

Mr. Farr: asked the Minister of Agriculture, Fisheries and Food if, in view of recent representations he will expedite the report of the Food Standards Committee on date coding.

Mrs. Joyce Butler: asked the Minister of Agriculture, Fisheries and Food if he will seek to expedite the report of the Food Standards Committee on the date-marking of perishable foods.

Mr. Anthony Stodart: The committee is proceeding with all reasonable speed to analyse the mass of evidence received from some 200 interested parties and to formulate recommendations on a subject which is both complex, controversial and of great importance and where experience in other countries must be taken into account.

Mr. Farr: Does my hon. Friend agree that one of the conclusions which must be drawn is that the sooner a simple and clearly marked date on certain food is stamped by the manufacturers to protect housewives, the better will housewives get a fair deal?

Mr. Stodart: This is precisely the matter at which the committee is being asked to look.

Mrs. Sally Oppenheim: Is my hon. Friend aware that it is an insult to the housewife to put coded date stamping on food when she can buy French yoghourt in any shop in England with the date clearly marked on it not in code?

Mr. Stodart: This is a point which undoubtedly is being looked at by the committee, which is going through a great deal of evidence.

Research and Development

Mr. Peter Mills: asked the Minister of Agriculture, Fisheries and Food what forms or organisation he has contemplated setting up in his consideration of the Rothschild Report, to represent the needs of the agricultural industry to serve as the customers proposed in the report.

Mr. Anthony Stodart: These among other points are still subject to discussion; but I accept the need to set up a Chief Scientists' Organisation within my Department, and also to ensure that the views of the agricultural and food industries are fully integrated into the process of formulating the needs of research and development.

Mr. Mills: Will my hon. Friend bear in mind that we already have a large technical advantage over the Community, that this needs to be maintained and that it means a lot of money being spent on research? Will he confirm that this is so and take advice on what the N.F.U. is saying on this subject?

Mr. Stodart: Yes, Sir.

Milk Fund

Mr. Mackie: asked the Minister of Agriculture, Fisheries and Food what proportion of the milk fund will be required to pay the increase to producers given at this year's review.

Mr. Prior: At this year's Annual Review we have given an increase of about £23 million which is just under 5 per cent. of the total value of the milk guarantee.

Mr. Mackie: From calculations which I have made on figures which I have received from the Minister, it has cost the consumer at least £80 million more for butter and cheese during the 21 months that the Government have been in power. This is where the fund has come from. Will the right hon. Gentleman answer two questions: first, was he not misleading the House when he said that the consumer did not pay for the extra penny that the farmer was getting; and secondly, does he think that the balance of the fund will maintain the decrease in milk prices to the consumer after September?

Mr. Prior: I will answer the last part of the hon. Gentleman's question first. The milk fund will hardly be in balance by the end of March, 1973, as a result of the reduction in price over the next four months.
On the first part of the question, the answer is that only a proportion of the increase resulting from the manufactured milk market goes into the milk fund. It is only that portion which lies within the standard quantity. The portion lying outside the standard quantity goes direct to the farmer. That will amount to about £15 million during the coming year if the price of manufactured milk remains at about its present level.

PRESIDENT POMPIDOU (DISCUSSIONS)

Dr. Gilbert: asked the Prime Minister what discussions on international monetary matters he had in his recent talks with M. Pompidou.

Mr. Onslow: asked the Prime Minister if he will make a statement on

his recent meeting with President Pompidou.

Mr. St. John-Stevas: asked the Prime Minister whether he will make a statement on his talks with President Pompidou.

The Prime Minister (Mr. Edward Heath): President Pompidou paid an informal visit to Chequers on 18th and 19th March. We discussed a wide range of subjects of interest to both our countries, including international monetary and trade questions, the future of the enlarged Community and East-West relations. The details of our discussion must remain confidential.

Dr. Gilbert: I put it to the Prime Minister that the reason that M. Pompidou is having a referendum is that he knows he will win, whereas the right hon. Gentleman is not having one because he knows he would lose. The reason in both cases is the same. Because of the appalling terms negotiated by his right hon. and learned Friend—

Mr. Speaker: Order. Is this a question?

Dr. Gilbert: —every French taxpayer will be benefiting by sharing in a lifelong pension of hundreds of millions of pounds a year paid for by the British taxpayer and housewife.

The Prime Minister: The reason is that both countries and Governments are following their own constitutional procedures.

Mr. Onslow: May the House take it that my right hon. Friend assured M. Pompidou that, whatever need there may be in France to show up the political divisions of their Opposition by holding a referendum on enlarging the E.E.C., we in this country require no such device to expose the divisions in the leaderless rabble on the Opposition benches?

The Prime Minister: My hon. Friend is correct, It is an internal matter for President Pompidou and the French Government. The Opposition here have made their divisions only too plain.

Mr. St. John-Stevas: Is not the referendum, as the Leader of the Opposition once said—for all I know, he may still be saying it—contrary to the traditions


of this country? In any case, will not the massive "Yes" that will be given on 23rd April to British entry make St. George's day as memorable in our history as St. Crispin's day?

The Prime Minister: The Leader of the Opposition on that occasion went on to say that
It is not a way in which we can do business."—[OFFICIAL REPORT, 25th November, 1969; Vol. 792, c. 200.]
I agree with him in that and hope that it is still his view.

Mr. John Mendelson: Will the Prime Minister give a little serious attention to what is, after all, a very serious question? Does he now agree that, given the fact that Norway and others of the applicant countries and the French people are to have a serious opportunity to express their opinion on this important move, it is high time he agreed that the people of the United Kingdom should also have such an opportunity in a General Election?

The Prime Minister: As for a General Election, it was made perfectly plain at the last General Election by this party that we had a mandate to negotiate—[HON. MEMBERS: "No."]—and that if the negotiations were successful we would put them to Parliament. Parliament—[Interruption.] However much hon. Members may dislike it, Parliament approved them by a majority of 112. It is on that basis that we are working.

SECRETARY OF STATE FOR EMPLOYMENT (SPEECH)

Mr. Duffy: asked the Prime Minister if the public speech by the Secretary of State for Employment at Dover on 4th March on the pattern of unemployment represents the policy of Her Majesty's Government.

The Prime Minister: Yes, Sir. My right hon. Friend explained how the high level of wage inflation had led employers to cut costs and to reduce their labour force.

Mr. Duffy: Given that the Secretary of State found no particular distortion in the underlying pattern, does not the Prime Minister think that there is a danger of school leavers and other young people, of whom there were nearly 5,000 in York-

shire and Humberside last month alone, being overwhelmed? Will he not therefore initiate more grants to industry for training schemes and to education authorities for career teaching? Does he think that it is sufficient that only 12 out of Sheffield's 32 comprehensive schools should be equipped with a careers room?

The Prime Minister: My right hon. Friend the Secretary of State for Employment has recently announced a massive plan for the increase in training. Although of course it will take time for that gradually to come into effect, it will meet many of the points which the hon. Gentleman has raised.

Mr. Geoffrey Finsberg: Would my right hon. Friend agree that the difference between the policies expressed by the Secretary of State and those followed by the party opposite is that, whereas we are deliberately trying to reduce unemployment, they deliberately tried to increase it?

The Prime Minister: Yes, Sir.

PRIME MINISTER (DISCUSSIONS WITH T.U.C. AND C.B.I.)

Mr. William Hamilton: asked the Prime Minister if he will make a statement about his future plans for talks jointly with representatives of the Trades Union Congress and the Confederation of British Industry.

The Prime Minister: I remain in close touch with the T.U.C. and the C.B.I., but the precise timing and form of future meetings have yet to be decided.

Mr. Hamilton: Can the right hon. Gentleman give an undertaking that, in subsequent meetings, he will meet the T.U.C. and the representatives of the C.B.I, together instead of separately? Will he further have a good look at the admirable article written in The Guardian yesterday by my hon. Friend the Member for Oldham, West (Mr. Meacher), which showed clearly that the present Government's incomes policy, linked with means-tested benefits right through the Welfare State, is destroying any prospect of real co-operation between ordinary working people and the Government, and that the higher-paid miner, who was granted an increase by the


Wilberforce recommendations of £4·50, finds that amount reduced to a magnificent sum net of 8p per week? Is this not an intolerable situation?

The Prime Minister: I cannot accept the last part of that supplementary question. On the first part, I noticed that the point of the hon. Gentleman's question was that the talks should be held jointly. I put this to the T.U.C. and to the C.B.I, when we had our first meetings and it was agreed that it is for consideration that there should be a joint meeting of both of them with the Government. But we also agreed that we would wait until our next discussions, after the Budget, before we settled when that meeting should come about.

Mr. Redmond: Has my right hon. Friend seen the recent report of the Institute of Fiscal Research, which shows that the poorest section of the community, thanks to the actions of the present Government, is 28 per cent. better off than before the last General Election? Will he draw the attention of the T.U.C. to that report?

The Prime Minister: In fairness to the T.U.C. I must say that when it has met me, it has not taken the view expressed by the hon. Member for Fife, West (Mr. William Hamilton).

EUROPEAN ECONOMIC COMMUNITY

Mr. Molloy: asked the Prime Minister when he expects a definite date to be announced for the proposed meeting of Heads of Government of members and applicant members of the European Economic Community.

The Prime Minister: I cannot say when a definite date will be announced, but it is generally agreed that this meeting will be held in the second half of October.

Mr. Molloy: If M. Pompidou allows him to, will the Prime Minister raise at that meeting the question of the difficult situation which might arise over some of the contracts and arrangements now existing between E.F.T.A. countries which might become E.E.C. countries? Will he try to iron out all the difficulties which will arise when they will not be able to honour some of the treaties which

they have signed? Britain could be put in such a situation.

The Prime Minister: We all hope that the negotiations with the E.F.T.A. countries will have been completed by the time the summit is held. As the hon. Gentleman knows, negotiations are going on at the moment in which we have endeavoured to be as helpful as we can, although we are not actually a party to the negotiations.

Mr. Lane: Is it not obvious to everyone except the carpers on the Opposition benches that, on the foundation of today's excellent Anglo-French and Anglo-German relations, this can be a great decade for Europe and that much of the credit for this prospect is due to the steadfast European policies of the present Government?

The Prime Minister: I agree with my hon. Friend. I am glad that he has emphasised that Anglo-German relations are equally good. We look forward to the visit of the Chancellor of West Germany in a month's time.

Mr. Lipton: Between now and October, is the Prime Minister going anywhere in particular?

The Prime Minister: I shall be going on an official visit to Denmark in June, but that is the limit of my overseas travelling plans at the moment.

No. 10 DOWNING STREET (VISITORS' REFRESHMENTS)

Mr. Bidwell: asked the Prime Minister what arrangements he has made or proposes to make for the provision of refreshments for visitors to No. 10 Downing Street.

The Prime Minister: Whatever is appropriate.

Mr. Bidwell: Is the right hon. Gentleman aware that this Question is partly inspired by reports that he had to send out for beer and sandwiches when he met the miners' leaders, in spite of the experiences set forth by my right hon. Friend the Leader of the Opposition? The Prime Minister seemed totally unprepared on this occasion, as he was for the miners' strike itself. It is also partly inspired by the fact that when the hon. Member for South all has walked all the


way from Clerkenwell Green and other places protesting about the right hon. Gentleman's immigration Bill, and against the rise of racialism and Fascism, he has not even been able to get a cup of tea at No. 10 Downing Street. Will not the right hon. Gentleman agree that he did very well out of the last Budget, that he will probably do well out of today's Budget and that he can afford much better?

The Prime Minister: Members of the miners' executive who came to No. 10 asked for tea, sandwiches, beer and whisky, and they were supplied with tea, sandwiches, beer and whisky.

Mr. St. John-Stevas: Can my right hon. Friend say whether Wincarnis is still being served?

PRIME MINISTER (SPEECH)

Mr. Carter: asked the Prime Minister if he will place in the Library a copy of his public speech made at Weston-super-Mare on 4th March, 1972, on the subject of the economy.

Mr. Dalyell: asked the Prime Minister if he will place in the Library a copy of his public speech to the Conservative Local Government Conference on Saturday, 4th March, on the subject of the economy.

Mr. Sheldon: asked the Prime Minister if he will place in the Library a copy of his public speech on 4th March at Weston-super-Mare on economic matters.

The Prime Minister: I did so on 7th March, Sir.

Mr. Carter: In that speech the right hon. Gentleman referred to the Government's desire to reduce unemployment to an acceptable level. Could he now tell the House what he and his Government believe an acceptable level to be? If, as a result of the measures to be announced later today, unemployment stands at 750,000 in the autumn, would he regard that as above or below an acceptable level?

The Prime Minister: I am not prepared to make forecasts on this matter.

Mr. Dalyell: When the right hon. Gentleman talked of an acceptable level, did he have any figure at all in mind?

The Prime Minister: I repeat what I have just said: I will not make public forecasts.

Mr. Sheldon: In his speech the Prime Minister made no attempt to explain the Government's incomprehensible policy on subsidies. Will he now reply to a question which he has previously failed to answer and say why it is right to spend £25 million subsidising sugar and wrong to spend £9 million on school milk?

The Prime Minister: My right hon. Friend the Minister of Agriculture has dealt with the question of the stabilisation of food prices—because this is a matter which affects the whole of the population and enables us to pursue the policy of preventing the cost of living from rising faster. I should have thought that this was a policy which had the support of right hon. and hon Gentlemen opposite. It is certainly one with which we intend to go on.

Mr. Tom Boardman: In his speech my right hon. Friend referred to regional problems. Can he say whether the massive battery of regional expedients deployed by the Leader of the Opposition, including his speeches, when he was in office, made any material change in the regional imbalance?

Hon. Members: Yes.

The Prime Minister: I am afraid that hon. Gentlemen opposite are wrong. If my hon Friend refers to the case of Scotland, for example, he will find that unemployment there has been on an upward-rising curve ever since 1964. I should have thought that both sides of the House could have recognised that the problems of the regions are very deep-seated indeed and that, over the past 25 years, neither party when in Government has yet succeeded in dealing with these fundamental problems of balance between the regions. Therefore, we are now determined to approach this with a fresh look.

Orders of the Day — WAYS AND MEANS

BUDGET STATEMENT

Mr. Deputy Speaker (Sir Robert Grant-Ferris): Before I call the Chancellor of the Exchequer, it may be for the convenience of right hon. and hon. Members if I remind them that at the end of the Chancellor's speech, as in the last four years, copies of the Budget Resolutions will not be handed round in the Chamber but will be available at the Vote Office.

INTRODUCTION

3.30 p.m.

The Chancellor of the Exchequer (Mr. Anthony Barber): The Budget which I introduced last year was the first of the new Parliament, and in it I outlined a programme of taxation reform which I shall be developing further today, but this Budget also is a first—from a different point of view. It is the first Budget since Parliament took the historic decision that we should join the European Economic Communities.
In January we shall become part of a new market of 300 million people. This enlarged outlet for our goods and services together with the present scope for expansion provide our country with an unparalleled opportunity over the coming years. The various proposals which I shall put to the House today are designed to help British industry to modernise, to re-equip and to reorganise to meet the challenge of greater international competition. And they are designed to ensure that we take full advantage of this unique set of circumstances to build a more prosperous Britain.
But if, because of the opportunity which is opening up, we are right to set our sights high and to look with confidence beyond the immediate future, we are right also to regard with profound concern the immediate problem of a level of unemployment which has persisted despite the unprecedented action to counter it which has been taken over the past year.
So these are my aims in presenting this Budget.
First, that, as we set out on our European venture, British industry should have every encouragement to be efficient and forward-looking.
Second, that the British economy should grow at a sustained and faster rate, and so bring a permanent improvement in both employment and living standards.
Third, that we should make further progress with taxation reform, so as to evolve a system which is more just, and a system which over the years and decades ahead will help to create a greater national wealth.
No taxation policy can of itself guarantee prosperity, but, as we have learned to our cost in recent years, it can most certainly hinder it. This is why taxation reform is an essential element of our strategy for increasing our rate of economic growth, and it is economic growth that we need to bring down the deplorably high level of unemployment and to increase the real wealth of our country.
There are some who have recently been doubting the whole idea of economic growth, because they fear that what is at present regarded as progress may, in fact, be causing, or be about to cause, irreparable damage to our environment. They are rightly concerned about the quality of life in this country and across the world.
I believe that most hon. Members, while recognising this concern, will still take the view that the main threat to the quality of life in this country has come from the inadequacy of real incomes, from social problems such as unemployment, and from those consequences of slow growth such as the persistence of bad schools, of old hospitals, of slums and urban squalor. The fact is that both the cause and the solution of all these problems lies in our economic performance.
I must warn the House that my statement today will be long. The House will recall that last year I announced plans for the radical reform of company taxation, of indirect taxation and of personal taxation. All these three reforms will become operative a year hence, in April, 1973. Because of the needs of business planning, including computer programming, it is now more than ever desirable that people should know as far ahead


as possible what are our present intentions about future tax measures. I shall, therefore, not only set out the structure and main details of the changes, but I have decided that it is right to take the unusual step of giving today my present ideas about the new rates for next year, even though the House and the country will recognise that these may have to be changed if circumstances alter. In doing this, I am following the principle of more "open government" in matters of taxation wherever I can, as, indeed, I did last year.
Also, I shall put forward further proposals for the reform of our taxation system, and, in particular, for the longer term, a scheme, which I shall in due course ask the House to consider, for a fundamental simplification and bringing together of our systems of Pay-as-you-earn and social security.

RECENT ECONOMIC DEVELOPMENTS

I start by referring to some of the main developments of the past year. It has been a year which has been dominated by the twin evils of inflation and unemployment.

Inflation

I ask hon. and right hon. Members to cast their minds back to the time of the Budget last March, a year ago. We were then facing a problem of cost inflation which, in the minds of many, was the biggest single threat to our prosperity. Both the problem and the threat remain, but I think that my right hon. Friends and I can fairly claim some success.

As regards prices, the facts have been published, and they speak for themselves. Since last summer the rate of increase has been halved.

I am sure that the whole House will want to pay tribute to the Confederation of British Industry for its programme of price restraint and to all the companies and nationalised industries which have responded. Together with the cuts which I made in selective employment tax and purchase tax, that programme has made a major contribution in reducing the rate of inflation and in improving the climate for wage bargaining.

Taking the past year as a whole, the average level of pay settlements has fallen

significantly. I have no doubt that, in part, this has been due to the slower rise in prices. In part, too, it may reflect a growing awareness of the truth—to quote one right hon. Gentleman—that "One man's wage increase is the next man's price increase"; that there is no future in an irresponsible scramble for higher pay all round if the only result is higher prices all round; and that rising costs may be just as damaging to employment prospects as falling demand.

But if it be true that we have already made considerable progress in the fight against inflation, it is true also that we still have a considerable way to go in narrowing the gap between the rate of increase of money incomes and of productivity. And, in the end, that is the only sure way that we can keep prices steady, maintain our international competitiveness and substantially improve the prospects for employment.

Output and Employment

There is universal agreement that the present high level of unemployment is on every ground—economic and social—one which no Government could tolerate. It is also generally agreed that over the past year unemployment has risen to a much greater extent than could have been expected if one had regard only to the movement of output. The upward trend in unemployment was partly the result of very slow growth in 1970 and a fall in output in the first half of 1971. But there has been an additional factor with major consequences for the level of unemployment—the so-called "shake-out" of labour which stemmed from the rapid rise in wage costs. While cost inflation is clearly one of the causes of high unemployment, I have never agreed with those who look to unemployment as the cure for inflation.

And so throughout this past year we have acted to raise the level of economic activity. The various reflationary measures which were taken resulted in a strong rise in demand in the second half of last year: between the first and second halves of last year gross domestic product is estimated to have increased by around 2½ per cent. or 5 per cent. at anannual rate. It is difficult to forecast the level of output in the first half of this year, especially in view of the dislocating effects of the coal strike, but, to give the


House the underlying trend, I believe that had it not been for the coal strike the growth of output between the first halves of 1971 and 1972 would have been broadly in line with the forecast which I made last July of 4–4½ per cent.

Monetary Developments

I turn now to monetary developments. A year ago I outlined a radical and far-reaching reform of credit control and banking arrangements. The details are known. Suffice it to say, therefore, that that reform is now in full operation, and it has opened a new era in British banking.

Monetary policy in the past year has been expansionary, in line with our other policies for stimulating the economy. All terms control restrictions on hire purchase, credit sale and rental agreements were removed last July. Interest rates have declined, and there has been a strong growth of bank lending and consumer credit.

All this has been reflected in a faster growth of money supply, and the high growth of output which I intend to sustain with this Budget will entail a growth of money supply that is also high by the standards of past years, in order to ensure that adequate finance is available for the extra output. To proceed otherwise would reduce the growth of real output itself.

This reasoning is now, I think, generally accepted. It recognises the important and strong effects that monetary policy can have on the economy. But it recognises also that these effects operate through demand.

And so monetary policy will be used in the future, as it has been during the past year, as an integral part of the general management of demand. Because one of the main qualities of monetary policy is its flexibility, I do not propose to lay down numerical targets. The policy will be geared to the needs of the situation, and will change as those needs change.

Government finance

It has been traditional to give, in the Budget Speech itself, some description of the Government's financial accounts, both past and prospective. But as all the

figures are set out in the greatest possible detail in the Financial Statement and Budget Report, I think that hon. Members will agree that I can this year spare the House an oral summary.

National savings

In last year's Budget I announced a number of improvements concerning National Savings. I do not propose any further changes at this time.

Over the past year National Savings have gone from strength to strength. In the 12 months to the end of February the amount of National Savings outstanding, including accrued interest, increased by £733 million, or about 8½ per cent. That is the best result ever recorded, and it reflects great credit on the whole National Savings movement. The thousands of voluntary workers throughout the country deserve our gratitude.

EXTERNAL DEVELOPMENTS

I turn next to the external developments which have taken place over the past year.

International monetary matters

For the international monetary system 1971 was certainly a critical year. Strains had already been apparent for some time, and the crunch came with President Nixon's announcement on 15th August—a date I well remember because it was the very day I was due to start my family holiday! After a succession of meetings of the Group of Ten, the agreement which we reached in Washington in December produced a realignment of currencies and the removal of the United States surcharge and related measures. That realignment should in time lead to an adequate turn-round in the United States balance of payments, which is a necessary element in restoring stability in international payments. It is bound to take time to work through, as in the case of any exchange rate change.

But that is only one part of the problem. There are other fundamental questions which as yet remain unsolved. The House will, I know, appreciate the point that the United States authorities have not a sufficient stock of reserve assets at present to restore general convertibility of United States dollars held by monetary authorities. But it certainly ought to be


possible to work out acceptable arrangements to enable International Monetary Fund operations to be restored to a more normal basis.

This affects in particular our own remaining I.M.F. debt, which now stands at £405 million, and which begins to fall due in June. Our reserves are now ample to repay it, and, as my right hon. Friend the Prime Minister has said, we want to repay it. Indeed, I should like to go further and repurchase also the £83 million of other sterling held by the I.M.F. This would fully reconstitute our so-called I.M.F. gold tranche, giving us £292 million automatically available for drawing from the I.M.F. in case of need as part of our reserves. It is indeed a strange world when we are frustrated in our determination to wipe the slate clean of our debts. I hope a solution will soon be found.

My own belief is that a return to a system in which all the major currencies are fully convertible depends on achieving a consensus internationally about the lines on which the international monetary system should be reformed. The crisis last year demonstrated clearly enough that reform is needed. I outlined my own view of the principles on which that reform should be based in my speech at the last I.M.F. annual meeting. The task now is to persuade some others that in the months ahead serious international discussions should take place in a constructive spirit.

Meanwhile in Europe I have been having discussions about the progress of the enlarged Community towards economic and monetary union. The steps which are proposed are fully compatible with—and, indeed, complement—the objectives of world monetary reform to which I have just referred.

United Kingdom balance of payments

The details of the United Kingdom balance of payments last year were published only a fortnight ago. So I can be brief. We had record surpluses, both on visible and on invisible account, resulting in a current surplus of £952 million. Our official reserves more than doubled.

THE ECONOMIC OUTLOOK

Balance of Payments

So much for the past year. I turn now to the future, starting with the prospects for the balance of payments over the next year. It is likely that world trade will grow rather faster in the year ahead than in 1971. Expansionary measures have now been introduced in a number of countries, and, of course, the removal of the United States surcharge and related measures will also help.

The current account is expected to continue to show a satisfactory surplus, but it will not be as large as it was in 1971, which in this respect was clearly an exceptional year. Earnings on invisibles should keep up well, but I expect the balance on visible trade to be less favourable this year. The monthly visible trade figures are bound to show a deficit from time to time, because there will be a faster growth of imports as our domestic economy expands. It is as well to remember that 1971 was only the ninth year since the end of the eighteenth century in which we have had a surplus on visible trade. There is no reason to expect that it will now continue year in year out. But a modest deficit on visible trade will be no trouble so long as the other important component of the current account, earnings on invisibles, continues to keep up well—as I believe it will.

Exchange Control

I must next give the House the outcome of a review of our policies governing international investment. I have decided on the following changes.

First, the financing from sterling sources of inward direct investment. As from tomorrow, permission will normally be given for subsidiaries of foreign companies making new direct investments in the assisted areas to draw finance without restriction from sterling sources; and for subsidiaries of E.E.C. companies the restrictions on finance from sterling sources will be completely withdrawn in respect of direct investments in any part of the United Kingdom.

Second, outward direct investment in E.E.C. countries. As from tomorrow, United Kingdom companies making direct investments in E.E.C. countries


will be allowed, as an alternative to the usual overseas borrowing, to use official exchange or its equivalent for the first £1 million of any project in an E.E.C. country, or in one of the acceding countries.

Finally, it is customary in the Budget Statement to refer to the so-called voluntary programme under which since 1966 companies and institutions have been asked to observe certain restraints on their investment in developed countries of the sterling area. It is right that I should pay tribute to those who have co-operated to maintain the programme over the past six years. But my right hon. Friends and I have always found distasteful the concept of this programme operated on a voluntary basis year after year. Accordingly, the voluntary programme is now abolished.

Full details of these changes are being given in a Treasury Press notice and Bank of England exchange control notices issued tonight.

I know that other relaxations have also been suggested, but I cannot go further this year. These particular changes have been selected with due regard both to prudence and to a right sense of priorities.

The Domestic Economy

I turn now to the prospects for the domestic economy.

I should at this stage stress that the analysis I am about to give of our economic prospects assumes no changes of policy. It is, of course, this analysis which provides the basis for my Budget judgment and for any proposals for change.

Looking ahead over the next 12 months or so, I would expect a recovery in private investment, both in manufacturing industry and in the service sectors. On present policies, however, I do not believe that this recovery would be of the magnitude required either to meet the challenge of Europe or to provide an adequate basis for a return to full employment.

On present policies, there are three main elements of demand where a slowing down during the year ahead seems probable—public investment, stock build-

ing, and private consumption. I deal with each of these in turn.

First, public investment. As the House knows, because of the high level of unemployment we have deliberately given a large, temporary boost to public investment: and as this comes to an end the rate of increase—albeit from a high level—is bound to slow down.

Next, stock building. Stock building was abnormally low last year. A recovery to a more normal rate is almost certain at some stage, though it has probably been delayed somewhat by the coal strike. While the recovery is taking place it will give an important stimulus to the growth of demand, but this stimulus will cease when stock building settles down again at a new, higher rate.

Finally, private consumption. This has grown rapidly over the past year, stimulated by taxation reductions, by the abolition of hire purchase terms control and by a large increase in social security benefits last autumn. This rapid rise in private consumption reflected a raising of consumers' expenditure from a lower to a higher level. But it is right to expect that when this process has been completed the rate of increase of private consumption will slow down again to a more normal rate unless steps are taken to stimulate it further.

In addition, account has to be taken of what is sometimes called "fiscal drag"—the fact that as personal incomes rise tax burdens tend to increase more than proportionately. It is true that a modest boost will be given to consumers' expenditure over the coming months by the repayment of post-war credits, but this again will be a temporary stimulus.

For these and other reasons I should expect that, on the basis of present policies, the growth of output would slow down significantly during the year ahead, and would go on slowing down thereafter. The implications of such a slowing down in the growth of output for the general prosperity of the nation and for the level of unemployment in particular are obvious. Such a situation would not be acceptable.

The Budget Judgment

I have therefore come to the conclusion that a further boost to demand is required.

In weighing up how great this should be, I have had to take account of a number of considerations—the Government's determination to reduce the level of unemployment, the dangers of inflation, the outlook for the balance of payments, and the paramount need to avoid a purely ephemeral spurt which before long led to another stop. Our task at this time is to lay the foundations for sustained growth over a prolonged period ahead.

Taking into account these various considerations, I have come to the conclusion that the stimulus to demand will have to be sufficient, taking account of both direct and indirect effects, to raise output in the first half of next year by about 2 per cent.

The measures I shall put to the House are intended to ensure a growth of output at an annual rate of 5 per cent. between the second half of last year and the first half of next. I have chosen as my base period the second half of last year because a much firmer estimate can be made of the level of output in that period than in the current half year, especially in view of the uncertain effects of the coal strike.

This growth rate of 5 per cent. is a "central forecast", and I stress that because of the many uncertainties to which, as every former Chancellor knows, such predictions are necessarily subject. This is the reason why policies must be flexible, and why the only sensible course is to be ready to act at any time of the year, as indeed I did last year.

If my present expectations are correct, output will have risen by 10 per cent. over the two-year period from the first half of 1971 to the first half of 1973. The extent to which there will be a reduction in unemployment is bound to depend on our success in slowing down inflation. If particular groups insist on pricing themselves out of jobs and the nation out of business no Government can secure full employment.

I do not believe that a stimulus to demand of the order I propose will be inimical to the fight against inflation. On the contrary, the business community has repeatedly said that the increase in productivity and profitability resulting from a faster growth of output is one of the most effective means of restraining price increases.

We now have a rare opportunity to secure a sustained and a faster rate of economic expansion over a considerable period of years. I will list five compelling reasons why this is so.

First, our entry into the Common Market next January provides us with a new opportunity for faster growth, which was the experience of nearly all the existing members of the Community when they joined together to establish the larger Market.

Second, we are starting from a position where there are more unused resources than there were at the beginning of any previous period of rapid expansion since the war.

Third, our potential growth of productivity is greater than it was on any of those earlier occasions.

Fourth, the growth of public expenditure, which is deliberately being accelerated very substantially during the coming financial year, will thereafter, as we have planned, show a marked deceleration. One of the purposes of this is to leave room for expansion in the private sector.

Fifth, both the current balance of payments and our reserves position are much stronger than they were at the beginning of previous periods of expansion. Moreover I am sure that all hon. Members in this House will agree that the lesson of the international balance of payments upsets of the last few years is that it is neither necessary nor desirable to distort domestic economies to an unacceptable extent in order to maintain unrealistic exchange rates, whether they are too high or too low. Certainly, in the modern world I do not believe that there is any need for this country, or any other, to be frustrated on this score in its determination to sustain sound economic growth and to reduce unemployment. But we should not delude ourselves. There can be no soft options if we fail to get a grip on ever-rising costs.

These are the principal reasons why I believe we can now realistically look forward to a prolonged period of sustained expansion, and indeed a prolonged period of expansion is exactly what British industry so desperately needs to provide the foundation and the confidence for ambitious and forward-looking modernisation.

For the very purpose of avoiding "stop go" and specifically in order to maintain steady growth over a period of years, there will doubtless from time to time need to be measures to regulate demand; and these may be in either direction. But the prospects for expansion and for growing prosperity over the next five years must surely be better than they have been for a very long time.

This Budget is designed to set us on that path.

SOCIAL SECURITY BENEFITS: UPRATING

At this stage I want to deal with one matter which is not strictly speaking part of the Budget proper—social security benefits. I thought it helpful in the particular circumstances of last year to refer in the Budget Statement to our intentions for the year ahead, and I do so again this year for this reason.

In our Election Manifesto we promised to review retirement pensions every two years to ensure that they at least maintain their purchasing power. We have, in fact, done better than we promised. As the House knows, the Government recently decided that in future the main social security benefits will be up rated every year and that the next prating will be this autumn. This, of course, is something that pensioners have been asking for for years.

My right hon. Friend will be making a statement about this tomorrow. But, as the House found convenient last year, I will today give an outline of the Government's proposals.

Last autumn the retirement pension was increased by 20 per cent. This autumn—the first time for 20 years that there have been increases only a year apart—the pension will be increased by a further 12½ per cent. The standard pension for a married couple will, therefore, be increased by £1·20 from the present rate of £9·70 to £10·90. The standard rate for a single person will be increased by 75p, from £6 to £6·75. Other national insurance benefits and war pensions will be correspondingly improved. The basic scale rates of supplementary benefit will go up by the same cash amounts as pensions.

This means that in cash terms pensions and benefits will have been raised by about one-third above the level at which they stood before last year's increase. The two increases together, in conjunction with the assurance of an increase every year in future, will go further to improve the position of pensioners than any previous measures in the history of national insurance.

The cost of the improvements in national insurance benefits is estimated at nearly £400 million in a full year. This, of course, leads me to the consequent increase in contributions.

Once again we have concluded that the fairest way of financing the increase is by moving towards the long-term contributions structure described in the While Paper "Strategy for Pensions". This year, however, we intend to go further in this direction than last year by transferring some of the burden from employees to employers. Accordingly, the employers' flat-rate contributions will go up by 10p for men.

The earnings ceiling for graduated contributions will be raised from £42 to £48 a week. Only a relatively small proportion of the total cost will then need to be found in other ways. We have decided to meet it by an increase in the rate of graduated contributions on earnings between £18 and £48 a week; these will go up from 4·35 to 4·75 per cent. for employers and employees alike. The ordinary flat-rate contribution by employees will remain unchanged, although there will, of course, be flat-rate increases for the self-employed and non-employed.

The Exchequer will, as in the past, contribute about 18 per cent. of the total contribution income.

The pre-Budget forecasts, to which I have referred, took into account the increases in both pensions and contributions.

There is one taxation aspect I must mention. Because the Inland Revenue is so heavily committed to work in preparation for the unification of personal taxation, and it cannot this year undertake any extra P.A.Y.E. recoding work, the increase in national insurance pensions and war widows' pensions payable in 1972–73—and I had better stress only the increase, and only in 1972–73—will be tax-free.

MODERNISATION OF INDUSTRY (INCLUDING COMPANY TAXATION)

I come now to a group of proposals designed to help British industry to expand and modernise and to improve its efficiency.

Reform of Corporation Tax: Choice of System

In last year's Budget speech I announced my intention to reform the structure of corporation tax in order to remove the present discrimination between retained and distributed profits. I explained that this discrimination distorts the capital market, tends to misallocate scarce investment resources, impedes companies that need to raise equity capital, and lessens the pressure for efficiency.

In the Green Paper on the reform of corporation tax which I published last year it was stated and explained that in order to achieve our objective there were only two real alternatives, a two-rate system or an imputation system which could be very similar in substance. Those two alternative systems were fully described and I invited views about the choice.

Since then there have been important consultations with industry, commerce and the professions about the alternative systems. These have been invaluable, and I think the House will agree that they have fully justified the decision not to introduce legislation until those who would be mainly affected by it had been consulted.

In addition, the choice set out in the Green Paper has been considered by the Select Committee under the distinguished chairmanship of my hon. Friend, the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), and we now have the benefit of its views. That Select Committee, like the Green Paper itself, was a new departure, although it was one which put into practice the view often expressed by those of us on this side of the House, that major tax changes should so far as possible be preceded by full and careful public consultation. The Select Committee completed its task with thoroughness and speed, and the whole House will agree that its report fully justified the innovation.

I should tell the House, frankly, that last year when I announced the proposal to reform corporation tax I had a preference on domestic grounds for the two-rate system.

Having said that, the fact is that the majority of those with whom we consulted clearly favoured an imputation system. So did the Select Committee, by a unanimous recommendation.

I have, therefore, reconsidered the matter in the light of this advice, and have come to the conclusion that the advantages of the two-rate system are not sufficient to outweigh the arguments that have been put forward in favour of the alternative. I therefore accept and endorse the Select Committee's main conclusion that the form of corporation tax to be introduced in this country ought to follow the imputation system set out in the Green Paper, and this is what I propose. The legislation will be in this year's Finance Bill, and the new tax will come into effect as from April next year.

I should add that in the course of the year I have been keeping closely in touch with developments in the community, which is engaged in a programme to harmonise the structure of its company taxation. It has not yet reached a conclusion, but the choice which we have made puts us in line with both France and Germany.

During the Budget debates my hon. Friend the Financial Secretary will be describing in greater detail the main features of the new corporation tax. I also thought that it would help the House, and those outside, if I were to publish at the same time as the Finance Bill a descriptive White Paper on the new corporation tax, and this will be done. There are, however, a number of matters on which it may be helpful for me to comment now.

International Companies

I have given a great deal of consideration to the position of those companies—and they include a small number of very important ones—which derive their profits and income wholly or mainly from overseas countries where the rate of tax is as high as, or higher than, it is here.

What these companies wanted was in substance a return to the arrangements, like those in force up to 1965, where the


excess of a company's overseas tax on its profits over the United Kingdom tax on those profits could be used to reduce the income tax on the shareholder's dividend. I made it clear in the Green Paper that this was not an alternative which the Government would favour, and I am sure, with the benefit of a further year for reflection, that that decision was right.

In reaching this conclusion I am, once again, reinforced in my view by the Select Committee. The Select Committee did not, of course, formally consider the possibility of a return to pre-1965 arrangements; it was choosing between the two systems which the Green Paper had indicated as the real alternatives. But it gave a great deal of consideration to the problem of companies trading mainly in countries abroad with high tax rates; indeed, the Committee took more evidence on this point than on any other.

Its views were clear and again unanimous. It said, first, that
…it is hard to see why double taxation relief should be so extended as to allow a United Kingdom based company not only to pay no Corporation Tax, but also to pay its shareholders net dividends on which no standard rate income tax has, in fact, been paid";
and, second, it said
…your Committee on balance…plump for the imputation system with a minimum Corporation Tax charge as an essential element".

In addition to conforming with the unanimous view of the Select Committee on this point, there is another compelling reason for my decision. It is this: To give the overseas companies the relief they want would cost the Exchequer something of the order of £100 million a year, equivalent to increasing the rate of corporation tax for the generality of companies by 2·5 percentage points. The alternative would have been to have recouped the lost revenue from the general body of taxpayers.

It is right, too, to note that for most companies trading overseas, relief for overseas tax under the new system will, in fact, be more favourable than at present. Furthermore, none will be worse off, not even the companies whose only profits are earned in high-rate countries abroad.

Indeed, what these companies fear is not that they will be worse off, for they

will not. What they are apprehensive about is that they will not be able to benefit as much under the new system as companies which have at least enough United Kingdom income to cover their dividends. And so they fear that their access to new capital for expansion and development may be impaired.

I believe that these fears are exaggerated; I recognise, however, that they are very real to the companies concerned. I recognise, too, that these companies play a most important part in the economic life of the nation. It is for these reasons that I have decided that, although I cannot meet their case in full, it would be right to give them some further relief for a transitional period. The present overspill payments will, therefore, be continued at their 1971–72 level for the period up to the end of 1976–77; by then we should be in a position to judge whether the companies' fears have, in fact, been realised.

For the purpose of this transitional relief I propose to leave the overspill rules unchanged with the single exception, logical under the new system, that as from 1972–73 increases in dividends will no longer diminish entitlement to overspill. This extension of transitional relief will cost £12 million in 1972–73 and £25 million for each of the four following years.

Rate

It is right that I should refer to the rate of the new tax. Because the tax will not become operative until April, 1973,it will not begin to be paid for the most part until 1st January, 1975. The normal practice, therefore, will be for the rate to be fixed in the 1974 Budget, and it will need to be determined in the light of the circumstances at that time.

This is two years ahead, and for the moment I can do no more than base what I say on the 50 per cent. rate which was taken for the purposes of illustration in the Green Paper. But I must stress that this is purely illustrative and that the actual rate cannot be fixed at this moment of time. I can, however, give the rate of advance payment as this is determined by the basic rate of income tax of 30 per cent. The advance payment of corporation tax will, therefore, be 3/7ths of the dividend paid.

Relief for Small Companies and Special Cases

I now turn to a matter of great importance—the situation of small companies under the new corporation tax. Both the Bolton Committee and the Select Committee rightly drew attention to the position of small companies which have to rely on their retained profits for a very large part of the funds they need for expansion and development. These small companies comprise a sector which is of crucial importance to the economy, and they must have every reasonable incentive to expand and develop.

I therefore propose that all companies whose profits for corporation tax purposes do not exceed £15,000 in any year will pay tax on their income at a special rate; with the illustrative rate of 50 per cent. the special rate for small companies would be 40 per cent., but I must stress again that these figures are illustrative. Notwithstanding the reduced rate of tax, any dividends paid will be treated as entitling the shareholder to full imputation credit in the usual way. There will be marginal relief for companies whose profits are between £15,000 and £25,000.

To give some idea of the significance of these provisions, I should tell the House that the full relief will be available to about 350,000 companies, which is more than 90 per cent. of all companies, and the marginal relief to a further 10,000 to 15,000. The cost will be substantial—on the basis of the figures I have taken £45 million in a full year—but well worth the encouragement which this will give to small companies.

My hon. Friend the Financial Secretary will be giving details of the way in which we propose to deal with building societies and co-operative societies, and also with certain unincorporated associations and other bodies of a broadly non-profit-making kind which have objects of a public nature.

Close Companies

I turn next to the taxation of close companies. To safeguard the Revenue there must be, and indeed there have been ever since 1922, special rules applicable to this type of company. But the 1965 legislation, when the name "close company" was coined, greatly multiplied the rules, and these have been

a constant source of complaint. There can be no doubt that in recent years the rules which the Inland Revenue was bound to apply have been unduly harsh and unnecessarily burdensome.

The first point to remember is that the only justification for special rules for close companies is to prevent avoidance of tax; there is no other justification. Accordingly, my starting point is that we should retain legislation of this sort only to the extent that significant sums of revenue are at stake.

The House will recall that we said in last year's Green Paper on the reform of corporation tax that one of the objectives was to secure a major simplification of the close company rules.

One important simplification which the new system of corporation tax itself enables us to achieve is this: a shortfall assessment will in future be confined to the income tax at higher rates and the investment income surcharge. But it is right that the simplification of the system should go well beyond this. Following the relief which I gave to trading companies last year, the starting point for shortfall will again be raised. This will be done in three ways which will be explained by my hon. Friend.

All these reliefs will take effect from next year when the new corporation tax comes into force. To give the House some idea of the practical significance and extent of these changes, the result can be expressed in this way. Last year's reliefs took out of shortfall over half the trading companies which at that time were within its scope; next year's raising of the threshold will effectively take out about half of those which remain. So the combined effect of the two Budgets will be to relieve altogether from shortfall some 80 per cent. of the trading companies that came within its scope in 1970 and previous years. This represents a very considerable easing of the work burden which for far too long has lain on the backs both of companies and their advisers and of the Inland Revenue.

In total, these changes and others which will be in the Finance Bill will amount to a very substantial simplification of the close company legislation. In future it will be strictly confined in scope, easier to understand and a good deal less difficult to administer.

Capital Gains of Companies—General

I come now to the treatment of capital gains of companies, and I deal first with companies in general. The Green Paper recognised that it would not be appropriate for the rate of tax on companies' capital gains to rise in line with the increase in the rate of tax on retained profits. It therefore envisaged that the overall rate of tax on gains might be reduced by the expedient, which is administratively simple, of leaving part of each gain out of account but charging the remainder at the full corporation tax rate.

This approach was endorsed by the Select Committee, and I propose to follow it. The fraction of the gains to be left out of account will be fixed at the same time as the new corporation tax rate. If I were fixing it now, I should proceed on the basis that the effective rate of tax on companies' gains should be 30 per cent.

Capital gains of companies—Unit and investment trusts

I turn next to a matter which has been the subject of a great deal of discussion in this House in recent years—the special case of approved unit and investment trusts. Ever since 1965 the trusts have contended that they should themselves be exempt from capital gains tax. For reasons which I shall explain, I do not believe that this is the appropriate solution. Having said that, I agree that the present tax treatment of unit and investment trusts is clearly both inequitable and complex. Despite the cost, it is right that the necessary changes should be made, and they will be included in this year's Finance Bill.

The guiding principle must be that the tax on capital gains should be neutral in its impact on the ability of a trust to act as a medium of investment. The present arrangements are obviously not neutral, for the 30 per cent. rate of tax on trusts' gains may be higher than the rate which the person of modest means would have to pay if he invested on his own behalf. Equally, the arrangements for avoiding the double taxation of gains, first when they are realised by the trust and then again when they are reflected in the value of units or shares, are so cumbersome in

practice that they may themselves deter investors.

So the law must be changed. But it would be a departure from neutrality simply to exempt the trusts in full, for that would give them the benefit of tax-free switching and would put them at an advantage compared with other investment media, and, indeed, with the ordinary individual managing his own portfolio.

As from April this year there will, therefore, be a new system under which gains realised by trusts will be taxable at the rate of 15 per cent. When the shareholder disposes of his ordinary shares or units, he, too, will be taxable, but in calculating the tax he has to pay he will be given a tax credit of 15 per cent. of the amount of his gain. This credit, which will not be repayable, will effectively take into account the 15 per cent. charge borne by the trusts.

The House will recall that most individuals do not pay capital gains tax at the full 30 per cent. rate on their gains; instead, they pay at their personal income tax rate on only half their gains up to £5,000 if this is more favourable. Under the new unified system next year, for those of them who are liable only at this basic income tax rate of 30 per cent., that will mean an effective capital gains tax rate of 15 per cent.

This in the case of units or investment trust shares will be wholly offset by the 15 per cent. credit on account of tax paid by the trust. The result will be that no individual on the basic rate of income tax will then have to pay any tax at all when he disposes of his units or investment trust shares; the trust will have settled the bill for him.

The new system will be much easier to understand and will certainly enhance the attractiveness of unit and investment trusts. The long-term cost will be about £30 million a year, although in the early years it may be somewhat higher than this.

Share Option and Incentive Schemes

Next, the matter of share option and incentive schemes.

In 1966 the Finance Act charged to income tax all gains from share options given by a company to its employees or directors. That legislation, as was no


doubt intended, effectively put a stop to share option schemes. But, as the House knows, there has since grown up a variety of share incentives schemes under which gains to participants are liable only to capital gains tax.

I believe it is now recognised on both sides of the House that the 1966 legislation was altogether too drastic and that, contrary to the view which was then put forward by Treasury Ministers, share options have a proper and valuable rôle to play in stimulating management enterprise and in helping industry to recruit and to keep the management talent that it needs.

The Finance Bill will, therefore, contain provisions under which share option schemes which are approved by the Inland Revenue as meeting prescribed conditions will be exempted from the 1966 legislation. Gains from other schemes will continue to be charged to income tax, and so in future will gains from share incentive schemes which do not meet similar conditions. The conditions will be broadly similar to those which responsible bodies regard as necessary to safeguard shareholders' interests.

Free Depreciation

The country now stands at a moment of great challenge but also of tremendous opportunity. If we are to take full advantage of the enlarged Community market which will be opening up for us in less than a year, one of our foremost tasks must be to improve our competitiveness as a trading nation.

The hard fact is that for years now the level of productive investment in this country has been low by comparison with that of our main trade competitors. For example, in 1970 Japan invested no less than 28 per cent, of her national income. The average figure for the Six was 19 per cent. In this country it was 15 per cent.

The primary factors which determine the level of productive investment are two-fold—business confidence in a sustained growth of demand, and profitability.

A major part of our strategy must, therefore, be to provide the climate in which industry can have the confidence to re-equip and expand.

For very many years the leaders of British industry have called upon successive Governments to introduce nationwide free depreciation for all investment in plant and machinery. The problem is, of course, that to do this would remove the present taxation differential between the country in general and the development areas, where, the House will recall, I introduced free depreciation in October, 1970.

The other request which has repeatedly been made by industry is for investment incentives which are stable and easy to understand. With the opportunities which are opening up for this country, the time has now come to provide these incentives.

As from tomorrow, free depreciation—that is to say, a 100 per cent. first-year allowance—will be introduced throughout the whole country for all investment in plant and machinery, other than passenger cars, whether the investment lakes place in a development area or not.

For the sake of simplicity free depreciation will apply equally to investment in new and secondhand equipment. In other words, as from tomorrow the whole country will enjoy the taxation treatment previously reserved for the development areas.

For industrial buildings the rate of initial allowance for new buildings outside the assisted areas, which was due to revert to 15 per cent. on 6th April this year, will be increased to 40 per cent. This means that the 40 per cent. rate of initial allowance for new buildings will apply throughout the country. Again, in this respect also as from tomorrow the whole country will enjoy the taxation treatment previously reserved for the development areas. The cost of all these changes will be £5 million in 1972–73 and £115 million in 1973–74.

There will be no change in the rate of corporation tax for the financial year 1971.

Regional Policy

It will, of course, be immediately apparent that by introducing countrywide free depreciation I have removed altogether the existing taxation differential in favour of investment in assisted areas. It is our purpose, however, not merely to re-establish the regional differentials but to do so in the framework of an


entirely new approach to regional policy which will give the development areas a more clear-cut preference than any previous system.

The new system of regional incentives will be simpler, more easily understood and more certain in its application than the existing arrangements. Businessmen will be able to evaluate more readily the advantages to both their firms and the country of providing more job opportunities in the assisted regions. My right hon. Friend the Secretary of State for Trade and Industry will be describing the Government's proposals in greater detail tomorrow, but the House will wish to know the main proposals now.

The existing arrangements for helping the development and intermediate areas rely heavily on the powers under the Local Employment Act to make grants of various kinds, in particular with regard to the building grants which are available throughout these areas on condition that the projects provide an appropriate amount of employment. The Government now propose, as a central feature in the renewed attack on the problems of the older industrial areas, to make building grants much more widely available. In respect of new industrial buildings started from tomorrow in the assisted areas there will be a new system of regional development grants which will not be subject to the employment condition and which will also be available, for example, for schemes which safeguard existing employment and for straightforward modernisation. The scope of these grants will be described in greater detail tomorrow by my right hon. Friend, but I should say now that they will apply to a wide range of industries in the assisted areas without their having to go through the procedures at present required under the Local Employment Act. This will speed up and also simplify the administration of the scheme.

The rate of grant for buildings in the intermediate areas and in the development areas other than the special development areas will be 20 per cent. In the special development areas it will be 22 per cent. Moreover, these grants will be on a different basis from previous grant incentives. They will not affect the recipient's entitlement to taxation relief on his investment; he will still be able to claim

capital allowances on the full amount of his investment notwithstanding that part of it has been covered by grant. The separation of grants and tax allowances in this way will not only make for simpler administration; it will also make it very much easier for the businessman to see the precise margin of advantage to him if he invests in an assisted area. The value of the new grants will be substantially enhanced by the new tax basis. For a company making profits a grant of 22 per cent. is equivalent, on the old tax basis, to a grant of over 30 per cent.

Geographically, the broad coverage of the development areas will be unchanged. But there will be a major extension of the intermediate areas to embrace, broadly speaking, those parts of the North-West and of Yorkshire and Humberside which are not already included, together with those parts of Wales which are at present unassisted. This will absorb into the intermediate areas a large part of what are termed the derelict land clearance areas. The remaining part of these derelict land clearance areas will, as a temporary measure, get the same 20 per cent. building grants as the intermediate areas for a period of two years, as a once-for-all fillip to industrial renovation.

Under the Local Employment Act the development areas, though not the intermediate areas, get other forms of assistance to industry. It is necessary to restore and reinforce the differential treatment of the development areas in a way which best meets their present need both for more enterprise in existing industries and for new firms and industries capable of seizing the opportunities provided by the European market. There are opportunities in these areas for foreign firms as well as British. These are powerful reasons why our incentive system needs to be simple to understand and capable of offering advantages to newcomers as well as to established firms.

The Government have, therefore, decided that in the development areas alone the grant scheme should be extended to plant and machinery on a basis closely related to the arrangements for building grants. The rate of grant for capital expenditure incurred on new plant and machinery from tomorrow will be the same as for building grants—thatis, 22 per cent. in the special development


areas and 20 per cent. in the rest of the development areas—and the scheme will be on the same new tax basis.

As in the case of capital allowances, the cost of these grants will depend on the level of qualifying investment, and actual payments fluctuate a good deal. Subject to that, the estimated additional expenditure in the development and intermediate areas is approximately £200 million in the first full year.

These general schemes will be supplemented by continuing selective assistance in the areas of high unemployment on the lines of the loans and special grants hitherto provided under the Local Employment Act.

The measures which I have announced—free depreciation and new measures for the regions—together provide the most powerful combination of national and regional investment incentives which we have had in this country since the war. Moreover, in order to give industry the stability it seeks when planning long-term investments I should make it clear that the intention is that the new system of investment incentives—[Hon. Members: "Grants."]—including free depreciation, should endure at least until the end of the E.E.C. transitional period; that is, to 1st January, 1978.

The object of these measures is twofold: first, to stimulate investment and modernisation and so to help industry to equip itself to compete more effectively in the Common Market; and, second, to make a new and intensified assault on the deep-seated problem of regional imbalance, which involves so much hardship and waste of resources.

The House knows my views about the regional employment premium. The previous Administration undertook that it would continue until at least September, 1974, and that there would thereafter be no question of abrupt termination of the scheme. In our manifesto we said that we would phase out R.E.P. taking proper account of existing obligations and commitments. That will be done, and R.E.P. will accordingly be phased out over a period from September, 1974. The rate and method of phasing out will be announced in due course in the light of the circumstances at the time and after consultation with industry.

MISCELLANEOUS

Relief for interest

I come now to the question of tax relief for interest.

During the Report stage of last year's Finance Bill, after referring to our election pledge, I explained at some length both the approach of the Government and the problems consequent on the Report of the Crow her Committee last year. The reference is the Official Report of 6th July, 1971, columns 1200–1203. I pointed out that the Government's commitment was part of a programme for a Parliament. I also made it clear that the burden on the Administration must be a major factor and that reallowance without restriction would require 1,000 extra trained staff. Nevertheless I intend to make a start this year.

For the reasons I explained last year there cannot be relief for ordinary hire-purchase transactions. That, of course has always been the position. There has never been relief in respect of ordinary hire-purchase transactions. For administrative reasons at present, and to maintain equity as between different forms of credit, the first £35 of all interest paid will not qualify for tax relief except in the case of loans for house purchase. Secondly, action will be taken to frustrate the artificial transaction of borrowing to buy dated securities with the certainty of a capital gain on realisation on or shortly before redemption. Subject to these two restrictions, relief for interest will be restored as from 6th April. The cost is estimated at £3 million in 1972–73 and £7 million in a full year.

Sale and leaseback, and deferred premiums

As was foreshadowed in announcements made last August, the Finance Bill will also contain provisions concerning the treatment of short leaseback arrangements, and of certain forms of tax avoidance involving the use of premiums for leases and other capital payments made by instalments.

Charities

In our manifesto we stated that we would encourage the flow of private funds to charities, and over the past year I have been considering how best to do this.


Charities already benefit greatly from the covenant system, and I do not propose to change that. It has repeatedly been put to me that there should be some relief from estate duty on bequests to charities and I agree. Unfortunately, because of the opportunities for manipulation by a few if very large sums were to be exempted, there must be a limit. Subject to that, it is right to act.

I have, therefore, decided that after today any property going to charities will be exempt from estate duty up to a maximum of £50,000. There are certain bodies concerned with the preservation of the national heritage where I am satisfied that there need be no limit. So property going to these bodies will in future be exempt from estate duty without limit. These include the National Trust, the National Gallery, and the British Museum.

There is one further and important way in which I propose to help charities. This proposal also is the outcome of representations and discussions over the past year. After today all gifts made to charities or to those other bodies I have just referred to will be exempt altogether from capital gains tax. In the case of this proposal the exemption will be without limit.

I have no doubt, from what I have been told, that these two proposals will be of very considerable benefit to the charitable and other organisations concerned. The estimated cost is £7 million in 1972–73 and £15 million in a full year.

INDIRECT TAXATION

I turn now to the value-added tax. The House will recall that a year ago I announced a major reform of indirect taxation under which a value-added tax would be introduced in April, 1973, and, at the same time, purchase tax and S.E.T. would be abolished. A Green Paper was published as a basis for consultation with trade and professional associations and other interested parties. That procedure has been widely welcomed, and the Customs and Excise Department has had separate discussions with more than 300 organisations.

This process of consultation has been invaluable in planning the details of the

tax with the object of ensuring that from the point of view of industry and commerce it will be at least as simple to operate as in any of the eight European countries which now have a V.A.T., and much simpler than in most of those countries. Our objective has been not merely to design a V.A.T. but to design the best possible form of V.A.T. There can be no doubt that the Green Paper procedure and the consultations which have followed have paid handsome dividends.

Last November I announced that I would publish the value-added tax legislation during the Budget debate instead of waiting for the publication of the Finance Bill as a whole. A draft of the relevant Clauses and Schedules will be available in the Vote Office when I sit down. This draft legislation forms an Appendix to a White Paper in which is set out an explanation of the main features of the tax. This will be a help both to the House, I hope, and to those outside. In the course of the Budget debates, my hon. Friend the Minister of State will be giving details of the tax. This afternoon I must of necessity concentrate on those aspects which are of wide general interest.

Tax-paid Stocks

Before I come to the tax itself, I deal with one particular aspect of the transition from purchase tax to V.A.T. which is both difficult and important—the treatment of stocks which will have borne purchase tax and which, being still unsold when V.A.T. begins, will then attract V.A.T. The problem of purchase tax paid stocks has been with us on a number of occasions over the years. It was not a problem for the previous Administration because it arises only when purchase tax is reduced. No satisfactory solution has hitherto been found. But the fact remains that if no relief were given many retailers and others holding stocks of purchase tax paid goods would seek to protect themselves by running down their stocks. Moreover, some retailers might increase their prices in order to recover both the purchase tax and V.A.T. on their goods.

This is a very difficult problem of transition, and I have considered a number of ways of dealing with it. In fact there is no perfect solution. It would be wholly impracticable to attempt an


accurate stocktaking on 1st April of every one of the half million businesses concerned and then seek to estimate the purchase tax they had paid. What is wanted is a formula which is simple, which involves the minimum of additional work at a time when everyone will be occupied immediately before V.A.T. becomes operative with the preparations for V.A.T., and which yet gives traders a reasonable measure of relief. After consulting a number of those concerned, the problem will be tackled in two ways.

First, those dealing in readily identifiable goods will be able to use sale or return arrangements, so that if the goods are still unsold when V.A.T. comes into operation there will be no liability to purchase tax. Most cars and many consumer durables are, in fact, already sold under these arrangements, which work well.

For other goods purchase tax will end a short time before V.A.T. is introduced, so that in preparation for it retailers will have an opportunity to build up stocks which have not borne purchase tax.

Details of these proposals are given in the White Paper, and there will be further consultations with trade interests. This scheme will have the advantage of benefiting the cash flow of traders. Similar problems will arise in respect of stocks of goods subject to the Revenue duties if those duties are reduced to avoid increases in the total level of taxation of the goods concerned when V.A.T. comes into operation. The extent to which I can make such reductions must take account of economic circumstances nearer the time. I propose, however, to take a power, to be used only before the introduction of V.A.T., to make appropriate reductions in the Revenue duties by order.

Small Traders Exemption

Before I turn to the rate structure of the V.A.T., there is one general exemption I should mention. Most countries which operate a V.A.T. provide some means of excluding small businesses. Having examined the different methods, I have come to the conclusion that the best way is to provide for a general exemption governed by turnover.

In determining the limit, there are two considerations: the loss of revenue, and

the need to ensure equity as between small and larger businesses in competition with each other. In those countries whore turnover is the criterion, the highest limit for exemption is £1,450. Bearing in mind, however, the need to keep the administration of the new tax simple, I have decided that there will be a general exemption for all businesses whose taxable turnover—including zero-rated items—does not exceed £5,000 per annum. This will exclude from the tax about half a million traders.

Rate structure and coverage

I now turn to the structure of the tax—both the rate structure and the coverage. In those countries which operate a V.A.T., the number of rates varies widely. I am referring to the number of positive tax rates, not including the zero-rate.

Most countries have several rates. For instance, France and Belgium have as many as four rates. Others have only one rate. It is self-evident that the fewer the different rates the easier the tax is to administer, the easier the tax is for the business community to operate, and the fairer and less distorting the tax is.

I am convinced that this is right. I have, therefore, decided that there will be only one uniform rate of value-added tax. What this rate should be I will return to shortly when I have described the coverage of the tax.

There is one area to which special considerations apply. Motor cars represent a major source of revenue from purchase tax—at present more than £300 million a year. To forgo a substantial proportion of this revenue would inevitably mean a significant increase in the rate of V.A.T. on all other goods and services. There will therefore be, in addition to the V.A.T., a separate tax on new and imported cars of 10 per cent. of the wholesale value, which will come into force at the same time as the V.A.T. The House should know that these two taxes on cars will together yield considerably less than the present 30 per cent. purchase tax on cars, and this reduction in yield should be reflected in car prices.

The Finance Bill will include a regulator power to change the V.A.T. rate between Budgets for the purposes of economic management, and this will, of course, apply to V.A.T. generally, including cars.


I have, however, decided that the new car tax will not be subject to a regulator power.

Main exempted and zero-rated categories

I turn now to certain cases which I think the House will agree justify special relief.

All countries with a value-added tax have provision for a variety of reliefs. But there cannot be too many special cases or one of the main points of the new tax would be lost.

Before describing them I would remind the House of the difference between exemption from value-added tax and zero-rating. In broad terms, a firm which supplies zero-rated goods or services gets complete relief from value-added tax both on its purchases and on its sales. One which is exempt is completely outside the tax; it does not have to charge tax on its sales but it cannot reclaim the tax on its purchases.

As is the case in all European countries with a V.A.T., there will be exemption for a variety of financial services, including insurance. There will also be exemption for postal services, for education and health services, and for certain other areas details of which are set out in the White Paper.

As far as charities are concerned, value-added tax will apply only to taxable activities undertaken by way of business. So only those few charities which supply taxable goods or services exceeding £5,000 per annum will, in fact, be subject to tax. The vast majority of charitable activities will, therefore, be outside the tax, and the overall effect on their costs of the changes in indirect taxation, taking into account the abolition of purchase tax and S.E.T., is likely to be very small. When account is taken of the proposals I have already put to the House on the direct tax side, it is clear that charities will be substantial net beneficiaries from this Budget.

I come next to the main areas where relief will be given by zero-rating. First, food.

In our election manifesto we promised that V.A.T.
would not apply to food, except for those few items already subject to purchase tax.

This undertaking will be honoured. Food, other than those foods now subject to purchase tax, will be zero-rated. Those items at present liable to purchase tax are estimated to yield about £150 million in the coming financial year, and if they were to be relieved altogether from V.A.T. there would have to be a commensurate increase in the rate of V.A.T. They will, therefore, be charged at the standard rate. The overall effect of these proposals, together with the abolition of S.E.T., will be a reduction in the burden of tax on food.

In the last Budget I said that newspapers, periodicals and books would be relieved of the tax. These, too, will be zero-rated. In the case of newspapers, zero-rating will apply not only to sales but also to advertising. This is right because there are special circumstances attaching to newspaper advertising, in particular the large volume of advertising by private persons. The relief will not apply to other advertising media.

Advertising on television, for example, will be undertaken almost exclusively by registered traders who will be able to reclaim the tax on this advertising under the ordinary accounting procedures of the tax.

In our election manifesto we also said that under a value-added tax
Special arrangements would be made for housing".
The details again are set out in the White Paper, but in broad terms what they amount to is that all new construction, whether of houses or of other buildings, will be zero-rated, while other transactions in land and buildings will be exempt. This means that new housing will be wholly relieved from V.A.T. What is more, it will also be relieved from the S.E.T. which is now a significant addition to housing costs. In addition, all rents will be exempt and there will be full relief for local authority rates.

Exports of goods will, of course, be zero-rated, as well as certain other items mostly connected with exports. One of the arguments which has been repeatedly put forward against a single rate tax is that there should be a special lower rate—as there is in some other countries—for such essentials as fuel—gas, electricity, coal—and passenger fares. I did consider these representations carefully but, as I have told the House, my conclusion


was against a special lower rate for these items. But fuel and fares, like food and houses, are of special importance to poorer people, and I have, therefore, decided that they shall have the most favourable treatment, and be zero-rated.

Rate

I now turn to the question of the rate at which V.A.T. will be charged when it is introduced in a year's time. As with all future rates of taxation, a final decision can only be taken in the light of the economic situation at the time.

But I am sure that it is right, in order to help industry and commerce with its forward planning, that I should state now the rate which I have in mind. Indeed, I think it is right to go further and to provide for that rate in this year's Finance Bill. In order to allow for the needs of economic management at the time when the tax comes into operation, the legislation will also include a once-for-all power to substitute by Treasury Order, before 1st April, 1973, a rate within a range of 2½ percentage points on either side of the prescribed rate. In other countries with a V.A.T. there is a wide range of standard rates, from the lowest figure of 10 per cent. in Luxembourg up to the highest, 23 per cent. in France. The rate prescribed in the Finance Bill will be 10 per cent. The House should know that, even taking into account the special arrangements for cars, the yield will be less than the comparable yield of purchase tax and S.E.T. at current rates.

To sum up. The particular value-added tax designed for the United Kingdom will be at least as simple to operate as in any of the countries which now have a V.A.T., and much simpler than in most of those countries. What is more, no country in Europe has a lower standard rate than the one I propose.

Over the past years there has been much talk about the relative effects of the change to V.A.T. on different levels of family income. In particular, it has been suggested that the change from purchase tax, with its high rates on so-called luxury goods and low rates on so-called essentials, to a single rate of V.A.T. might bear more heavily on the poor than on the rich. Yet in practice these definitions of luxuries and essentials

devised in the main 30 years ago have little relevance today. It makes no sense that, for example, television sets, electric, gas or paraffin heaters are taxed at 30 per cent., while items such as Persian carpets or the latest Paris fashions should be taxed at a mere 11¼ per cent. And I am sure hon. Members opposite will be hard put to explain why, to take two pertinent examples, boats should be exempt from purchase tax while pipes are taxed at 45 per cent.!

The V.A.T. I have outlined has been deliberately designed with the interests of low income families in mind. Food and housing will be relieved of the tax, and these are, of course, very important items in the budgets of lower income families. S.E.T., which at present enters into the cost of both food and housing, will go. If I had stopped there, it would have been open to question whether the change would be regressive. But I am going much further. Fares and domestic fuel and light will also all be zero-rated. The decision on fuel is almost as important in this respect as the decision on food, because fuel like food takes up a significantly larger proportion of the budgets of low income families, including, of course, pensioners, than of those who are better off. There is, therefore, no reason to fear that the change-over to V.A.T. will be regressive.

Purchase Tax

I have said that the stimulus to demand needed in this Budget should be sufficient to raise output in the first half of next year by about 2 per cent. As one means to this end—and to help to keep down prices—I have decided to take some further action on purchase tax now, and to do so in a form which will smooth the transition to V.A.T. From midnight tonight the 45 per cent. rate and the 30 per cent. rate of purchase tax will both come down to 25 per cent. The cost will be £135 million in 1972–73.

These changes, together with the cuts of last July, go a long way to reverse the successive increases in purchase tax made under the previous Administration, and I am glad to have been able to return the top rate of tax from the 55 per cent. at which it stood before last July to 25 per cent. at which it stood when my right hon. Friend the Home Secretary was Chancellor of the Exchequer in 1964.

These changes will be widely welcome in bringing an immediate reduction in prices.

This is a further step in the gradual two-year process of abolishing purchase tax and S.E.T. and moving to a V.A.T. In fact, the total overall effect of the whole process of the reform of indirect taxation starting from the time of my announcement in the last Budget and moving to a V.A.T. of 10 per cent. will be to reduce taxes on expenditure and so help to keep down the cost of living.

ESTATE DUTY

Green Paper

I turn now to estate duty. As the House knows, a number of threads run consistently through the taxation reforms on which we are engaged—the need to restore incentives, the need to encourage savings, and the need to create conditions in which men and women can, by their efforts, contribute effectively not only to their own well-being but to the prosperity of the country. Last year I announced major reforms of personal income tax, of corporation tax, and of the whole system of indirect taxation.

On the first we legislated last year, and, as I have already said, the second and third will be covered in this year's Finance Bill. The House will be relieved to know that I do not propose that this year's Bill should also provide for the complete reform of the system of taxation of capital on death.

But the time has now come when we should begin to consider whether the estate duty, which has been with us for about 80 years, is in fact the right means of taxing capital on death. Other countries have evolved systems which are fundamentally different from ours. Is it right that, in general, as under the existing system, the amount of duty should be calculated by reference to the value of the whole of the deceased's estate, without regard to its distribution?

May there not be a case for calculating the duty by reference to those who inherit the property rather than by reference to the deceased? Is there not also an argument for scales of duty which vary according to the relationship of an inheritor to the deceased? Is it right that

the same rates of duty should be payable in respect of a bequest to a son or a daughter as to a stranger? In other words, while the system of estate duty undoubtedly has considerable advantages, we should consider whether an inheritance tax might not be fairer.

It would be quite wrong to take such a fundamental decision without the fullest public discussion. Over the past year we have been making a thorough review of the complex issues which are involved and of the implications of replacing estate duty by an inheritance tax. The outcome of that review is today being published in a comprehensive Green Paper. It deliberately reaches no conclusion. All I ask is that the whole subject should be considered afresh without preconceived ideas.

Changes

Because full public discussion of a possible reform is bound to take some time, it would be wrong to leave matters where they are. The burden of estate duty has been made much heavier over the years by the fall in the value of money. The present estate duty scale, which broadly speaking dates from 1949, and which was regarded as pretty severe when imposed by Sir Stafford Cripps, has become more and more severe in its incidence as the years have gone by.

I have already told the House of my proposals for relief from estate duty on property going to charities.

There is one particular aspect of estate duty which has been raised on a number of occasions during the past year. It has been suggested that the matrimonial home should be exempt from estate duty. I have considered this proposal carefully, but I cannot agree, because to provide this relief would be very unfair as between the widow whose husband owned his house and the widow whose husband chose to rent it. But, having said that, I have no doubt that there should be special relief for the widow, and that the fairest way to achieve this is to make the relief general.

I have, therefore, decided that in future any property going from a husband to his widow, up to a sum of £15,000, will be left out of account altogether for estate duty purposes. This relief will apply equally to property left by a wife to her husband.

Secondly, I propose to raise again the threshold below which no estate duty is payable. It will be increased from £12,500 to £15,000.

Taking these two reliefs together, the effect, for example, will be that where the estate is left wholly to the widow no duty will be paid at all unless the estate exceeds £30,000 and thereafter the estate duty will fall only on the excess over that sum, and will, of course, start at the lowest rate.

Thirdly, I propose to take action to ease the burden of the duty, which has been increasing because of the fall in the value of money since the 1949 scale was fixed. So far as the smallest estates are concerned, the policy of both Governments in progressively increasing the exemption limit has protected these estates, and this form of relief has to some extent extended to estates immediately above the exemption limit. I have carried this process a step further today.

So far as estates above this range are concerned I would have liked in principle to have gone all the way back-to the 1949 scale re-expressed in real terms—that is, adjusted to take account of the fall in the value of money. I cannot go as far as this, but there will be a completely new scale. This new scale, which appears in the Financial Statement, while giving a measure of relief, still remains generally more severe in real terms than the 1949 scale. It reaches a top rate of 75 per cent. on property over £500,000. I might mention that if I had continued the scale to a top rate of 80 per cent. at, say, £1 million, it would have added to the yield only an extra £500,000.

The relief for the surviving widow—or widower—will cost £60 million in a full year and £30 million in 1972–73. The increase in the threshold and the reduction in the rates will cost £68 million in a full year and £34 million in 1972–73. The relief for charities will cost £15 million in a full year and £7 million in 1972–73. These are big figures, but more than two-thirds of the total cost represents the relief for the widow, for charities and the increase in the threshold. The reduction in rates accounts for less than a third of the cost. While it represents a real measure of relief, as I have already said it leaves the scale generally higher in real terms

than it was in 1949, and by international standards our death duty charge is still exceptionally heavy.

These changes will relieve from duty 40 per cent. of estates which would otherwise have been liable, and with the changes I made last year this means that altogether 50 per cent. of estates which would otherwise have been liable to duty will have been wholly relieved—all of them at the lower end of the scale.

All these proposals will take effect in relation to deaths occurring after today.

PERSONAL DIRECT TAXATION

Tax-Credit System

Before I come to my final proposals I must refer to one other important area of long-term reform. Last year I announced that we were carrying out a study into ways of simplifying the whole structure of the P.A.Y.E. system, in particular the possibility of introducing a non-cumulative system. As we promised, we have also during the past year been considering the implications of a negative income tax.

The future of P.A.Y.E. is, of course, mainly a question of the mechanics of tax collection. A negative income tax raises much wider questions of the whole approach to social payments and the relief of poverty. Yet it soon became apparent that in practice the two studies were closely linked.

The present P.A.Y.E. system is well established: it is fair and it is respected. The unification of income tax and surtax and the ending of the complicated earned income relief will make it easier to understand and to operate. Yet certain well-known disadvantages will still remain. The process of annual coding is complex and time-consuming, and it is difficult for the man in the street to understand. Even after unification the P.A.Y.E. system will require the employment of some 35,000 in the Inland Revenue and perhaps as many again in industry.

As the House knows, while we have been searching for a simpler system I decided that the Inland Revenue computerisation programme should be suspended. I am well aware of the disruption and disappointment that that decision caused. Yet I am sure that it


would have been a great mistake to go on with a vast new mechanisation programme only to have to make radical changes, possibly before it was completed.

In Britain we have two systems existing side by side—a taxation system which embodies a set of reliefs and allowances based on one set of principles, and a social security system which embodies a different set of benefits and allowances based on a different set of principles. Each has been amended and added to again and again over the years. It is obvious that immense difficulties are involved in trying to bring these two separate systems together in a simpler and more general system.

But there can be few in this House who have not at some time or other been attracted to the idea of some form of negative income tax. The theoretical attraction of such a scheme, as hon. Members will know, is that there should be a single assessment of income which would suffice either for calculating the tax due if the income is above a certain level or for calculating the social benefit to be paid if it is below that level. Such a scheme would provide a fairer and more accurate method of directing help to many people in need, and it would tidy up the present borderline between taxation and social benefits. It would provide a smoother graduation from the area of benefit to that of taxation, and so it would avoid some of the worst features of what has become known as "poverty surtax", with all that that implies by way of disincentive to earn more.

One of the difficulties of making progress hitherto has been that no really detailed scheme, which took account of all the complications of our two systems of taxation and social security, and which could reasonably be regarded as practicable and acceptable, has been put forward as a basis for discussion.

Last year a comprehensive and detailed scheme was worked out by Mr. Cockfield, my special adviser on taxation, it was a new tax-credit system combining many of the features both of a form of negative income tax and of a radical simplification of P.A.Y.E. After consider-in gthis, my right hon. Friend the Secretary of State for Social Services and I decided to set up a working group of

senior officials—some full time on this particular project—to examine the new scheme. Their studies have confirmed our own belief that this new system is both practicable and desirable.

Because this is a development of such immense importance, and a development which is, I believe, in principle acceptable to hon. Members in all parts of the House, it seems to me to be eminently suitable for examination by an all-party Select Committee of this House. I therefore propose to publish later in the year a Green Paper setting out the scheme in detail. I hope that the House will in due course agree that it should be referred to a Select Committee for study and report.

It is essential that there should be plenty of time for full public discussion, but I would expect that if such a scheme found general acceptability we should be able to legislate during the course of this Parliament. The preparatory work before such a massive change could actually come into operation would, of course, take longer.

I must ask the House to await the publication of the Green Paper later in the year, but hon. and right hon. Members will be interested in the following salient features of the tax-credit system.

It would cover about 90 per cent. of the population. For these people all the main personal tax allowances—the single, married and child allowances—would be abolished and replaced by a simple system of credits which would be payable whether or not the recipient was a taxpayer. Credits would normally be set off against tax payable, but where the credit was greater than the tax the difference would be paid as an addition to the wage or other income.

Family allowances and all the complications of the claw-back would likewise go and be superseded by a child credit. In almost all cases credits would also supersede the family income supplement

The National Insurance Scheme, reconstructed as proposed in the White Paper "Strategy for Pensions", would continue, as would the supplementary benefit scheme. But the number of people who would need to draw supplementary benefit would be substantially reduced.

The P.A.Y.E. system would be reduced by a system embodying a simple


non-cumulative tax deduction at the basic rate of 30 per cent., with supplementary deductions for the small proportion of taxpayers liable at the higher rates of tax.

Under the present system there are 450 P.A.Y.E. codes which have to be operated by nearly a million employers. All this would disappear completely. The task of the employer would be made easier, and the system would be far simpler for the taxpayer to understand. For the great majority of taxpayers there would be no year-end assessment.

The scheme, as well as applying generally to those who are in employment and come within the national insurance scheme, would also cover retirement and other national insurance pensioners and those who receive short-term national insurance benefits. The credits would continue to be paid during unemployment and sickness and, as a corollary, the corresponding benefits would be brought within the tax net as was originally provided when the present national insurance scheme was introduced by the post-war Labour Government. As the House will recall, their subsequent exclusion from tax rested solely on administrative grounds which will disappear under the new system.

Finally, the scheme would save some 10,000 to 15,000 civil servants.

If this scheme commends itself to the House, it would provide a substantial and comprehensive benefit to lower-paid workers and to a very large number of retirement pensioners. It would provide this benefit without individual means-testing, but the benefit would, in essence, be selective because its value would fall progressively as income increased.

This new system represents the most radical reform, improvement and simplification of the P.A.Y.E. and social service systems for a quarter of a century. Not only that, but it would also mean a considerable improvement in the position of very many people in the more hard-pressed sections of the community. I commend it to the House.

Unified tax

Last year we legislated for the new unified system of direct personal taxation, which will become operative in April next year. The Finance Act, 1971, provisionally fixed the basic rate of tax and the

level of personal allowances which would apply under the new system. I explained, however, why I could not then—two years ahead—settle the higher rates of tax and the details of the surcharge on investment incomes. But I was pressed from both sides of the House to give some indication before the Budget of 1973.

I agree that in such an important change as we are making the people who will be affected should know broadly where they stand. Moreover, many large concerns these days use computers to calculate their employees' pay and tax. If the higher rates of tax were not to be announced until this time next year, they would be faced with some difficult problems in amending their computer programmes. All the rates of tax which next year will operate under the unified system will, therefore, be provisionally fixed this year.

The House will recall that the present complicated dual system of income tax and surtax will be abolished and will be replaced by the higher rates of income tax. The schedule of these rates is set out in the Resolution which will be circulated shortly. But I can summarise the proposals in this way. On the first £5,000 of taxable income—that is, after account has been taken of personal allowances—tax will be charged at the basic rate of 30 per cent. The rate for the slice of taxable income between £5,000 and £6,000 will be 40 percent. and the rates for successive slices above that amount will rise in steps of 5 per cent. until a maximum rate of 75 per cent. is reached at the level of £20,000. This will provide a much simpler, smoother and more easily understood scale.

I now turn to the investment income surcharge which the House will recall is to be imposed on the larger investment incomes. I have made it abundantly clear that I regard the present form of discrimination against investment income as unacceptable. Indeed, among the advanced countries of the world the United Kingdom and France are the only two which draw such a distinction to any significant degree. One of the foundations of the unified tax system is that only the larger investment incomes should attract the surcharge; in other words, that the first slice of investment income should be charged at the same rates as earned income. To fix a low starting point would undermine this principle.

I have decided, therefore, that the surcharge will be imposed only on the excess of investment income over £2,000. As well as benefiting retired people living on income from past savings, this will also be of considerable help to people such as divorced and separated wives who depend on what the income tax rules treat as investment income. The House will be interested to know that it is estimated that no less than 30 per cent. of the tax reductions arising from the new unified system will go to the 11 per cent. of taxpayers who have retired. Furthermore, the fact that from next year the first £2,000 of investment income is to be treated exactly the same as earned income will be an important encouragement to the personal saving we shall need to finance investment.

The rate of the surcharge will be 15 per cent. This will, of course, be in addition to other tax, so that a taxpayer whose income is within the basic rate band will pay in all 45 per cent. on any investment income which is liable to surcharge; that is, on that part of any investment income over £2,000.

The net cost of these changes will be £300 million in a full year.

Surtax

When the new unified system of tax is in full operation the surtax office will be run down and eventually close. This poses a transitional problem. And so to meet the very difficult staffing position before unification takes over I propose to adopt precisely the same device as the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) adopted in his last Budget in almost identical circumstances. For the short time before surtax goes, the surtax starting point will be raised by £500, with marginal relief, but when income exceeds the new limit surtax will continue to be charged at the same rates as at present on the excess over £2,000. The result will be that, at a cost of £14 million for the full year, 130,000 taxpayers who are just within the surtax net will be taken out of charge for this year, over a third of whom have not paid surtax before. I should perhaps add that but for this change the cost of collection of the £14 million would be £1¼ million. The details of this change

are in the Financial Statement and Budget Report.

I know that the whole House will join with me in congratulating the two Revenue Departments on the way in which they have tackled the programmes of reform, and I hope the House will allow me to give my personal thanks to my three outstanding Treasury colleagues.

Personal allowances

The various changes that I have so far announced would raise output in 'he first half of next year by under ½ per cent. But the House will recall that my Budget judgment was that output should be raised in that period by around 2 per cent. in order to increase our rate of economic growth to 5 per cent

I come, therefore, to my final proposal. Last year I reduced the standard rate of income tax and I made a start on raising tax thresholds by increasing all the child allowances and so raising the starting points of tax for all families with children. This year I believe a broader approach to the problem of the threshold is called for.

There will, therefore, be no change in the standard rate. Instead there will be increases in both the single person's allowance and the married allowance. This is undoubtedly the best means of helping taxpayers generally right across the board. If effect is to be given to these changes quickly and without an impossible work burden, the increases must this year be of the same amount. Otherwise it would be necessary to recode a very large number of taxpayers, and it is simply not within the capacity of the Inland Revenue to do this at this time. It has, in fact, arranged to speed up the preparation of the new tax tables so that on this occasion the reductions can be reflected in the first pay packet after 3rd May.

We on these benches believe that the British people have been taxed too heavily for too long. We have already made a start, but we must go further. The personal allowances will, therefore, be increased at a cost of £960 million in 1972–73 and £1,200 million in a full year. The single person's allowance and the married allowance will each be raised by £135. The House will not be surprised to know that these are the largest increases which have ever been made in


these allowances. The single person's allowance will be raised from £325 to £460 and the married allowance from £465 to £600.

The income limits for age exemption will also be raised, to £634 for a single person and to £929 for a married couple. The limit for small income relief will be raised to £550.

The increase in the personal allowances will mean that the point at which a person starts to pay tax will be raised very considerably. For the single man and the married man without children the starting point will go up by £174 a year of £3·34 a week. If one considers the family man with children the change is even more impressive. Before last year's Budget a married man with two young children started paying tax when his earned income reached £16·15 a week. As a result of last year's increase in child allowances and this increase in the married allowance, his tax threshold will be up by £5·31, so that he will in future not start to pay tax on his earned income until it reaches £21·46 a week.

Another way of expressing this year's changes is that, while all those below the new starting points will be totally exempt from tax, everyone in the land who remains liable to income tax—and there are over 21 million of them will pay £1 a week less tax. And, of course, in the case of those married couples where the earnings of husband and wife are each over the threshold, they will pay £2 a week less tax. About 2¾ million people who would have paid tax this coming year will be freed of liability altogether.

Conclusion

The other day my right hon. Friend the Prime Minister said that the nation expected Government, employers and unions alike to act in the national interest to defeat inflation.

Over the past year the Government have made the biggest ever cuts in indirect taxation. Both public and private industry have supported the C.B.I, initiative on price restraint. Since last summer the rate of rise in prices has been halved.

Today I have announced a £1,000 million cut in income tax which will increase by £1 a week the take-home pay of every taxpayer above the new starting point.

I am the first to admit that a year ago when prices were rising much faster it was not easy for some to accept the need for moderation in pay claims. But today the situation is quite different, and I believe that the British people will now have no patience with any group whose actions endanger our hopes for prices and employment.

In total, the reductions in taxation which I have announced today amount to some £1,200 million in 1972–73, together with the other reductions which have been made since this Government came to office, the burden of taxation in this coming year will have been reduced by over £3,000 million.

To sum up, this is our purpose: to revitalise British industry so that it can open up the new frontiers of Europe; to achieve a rate of growth twice as fast as in the past decade; and to secure a growing prosperity which can be sustained into the foreseeable future and which will benefit all our people.

Mr. Deputy Speaker: Perhaps at this point I might remind the House of the procedure to be followed. Under Standing Orders, the Motion entitled "Provisional Collection of Taxes" must be decided without debate. When that has been disposed of, I will call the right hon. Gentleman to move the Motion entitled "Amendment of the Law", and on that Motion the Budget debate will take place today, and on succeeding days. The remaining Motions will not be put until the end of the debate on Monday.

PROVISIONAL COLLECTION OF TAXES

Motion made, and Question,

That pursuant to Section 5 of the Provisional Collection of Taxes Act 1968 provisional statutory effect shall be given to the following Motion—

Purchase Tax (Motion No. 3).—[Mr. Barber.]

put forthwith, pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

AMENDMENT OF THE LAW

Motion made, and Question proposed.

That it is expedient to amend the law with respect to the National Debt and the public


revenue and to make further provision m connection with finance; but this resolution shall not authorise the making of—
(1) amendments of the enactments relating to purchase tax, other than amendments for or in connection with the abolition of the tax, and other than amendments making the same provision for chargeable goods of whatever description, or for all goods to which any of the several rates of tax at present applies; or
(2) amendments of the enactments relating to selective employment tax so as to give relief from tax—
(a) by way of exemption from, or a reduction in the rate of, tax except in respect of all persons of the same descriptions relevant for determining the rate of the employer's flat-rate contribution with which the tax is combined, whether that contribution is under the National Insurance Acts or under the corresponding enactments in Northern Ireland; or
(b) by way of providing for payments to employers of an amount equal to the whole or a specified part of the tax paid if the proposed provision—
(i) is in respect of employers in, or at establishments in, part only of Great Britain; or
(ii) extends to employers in, or at establishments in, Northern Ireland; or
(iii) is in respect of all persons in any particular description of employment in all parts of Great Britain, and relief in respect of the whole of the tax paid could be given in respect of that description of employment by an order under section 9(1)(a) of the Selective Employment Payments Act 1966 adding that description of employment to the employments to which section 1 or 2 of that Act applies; or
(c) by adding or removing any employer to or from the employers to whom section 3 of that Act applies, or
(d) by amending the provisions of Schedule 1 or Schedule 2 to that Act.—[Mr. Barber.]

5.38 p.m.

Mr. Harold Wilson: I will begin as last year by congratulating the Chancellor on the great clarity and the agreeable manner with which he explained his proposals and the philosophy underlying them. His speech was certainly long and must have been arduous. He showed no signs of strain, and I think he kept his clarity and lucidity until the end. Perhaps the highest praise of all, which I think is appropriate, is that he introduced at various points sparkling elements of the best Yorkshire humour, not excluding at one point, the macabre.
I believe that the whole House will want to congratulate the right hon.

Gentleman on at any rate some of the ways in which he has chosen to disburse the remissions of taxation and the increased public expenditure, faced as he is—he has taken full advantage of it—with the paramount necessity of reflating the economy in a major way at this time to deal with the slump and the intolerable level of unemployment.
The whole House will applaud the right hon. Gentleman's reproduction of investment grants. We condemned him in October, 1970, for scrapping them. In every debate on unemployment my hon. Friend's have demanded the restoration of investment grants, and now he has, in effect, restored them. It was a pity that he could not quite find it possible to mouth the word "grants" when he told us of his decision.
The right hon. Gentleman will be glad that in addition to the vociferous and full-throated cheers from his hon. Friends, particularly when he sat down, on this occasion—this is rare for any Chancellor—there were almost equally enthusiastic cheers from hon. Members on this side of the House for his announcement of the restoration of investment grants.
The right hon. Gentleman will realise that there is more rejoicing in the Kingdom of Heaven and on the Opposion benches over one sinner that repenteth, particularly when he is a right hon. sinner.
One must, however, ask how many jobs have been lost during this period as a result of the wrong decision on investment grants, a decision against which we warned the right hon Gentleman. How much unnecessary uncertainty has been caused to industry? While we welcome the restoration of investment grants, fresh calculations will, of course, have to be made by industry.
We hope that the right hon. Gentleman's words about R.E.P., which were singularly carefully phrased, mean that he is on the run there as well and that by the time he next faces the House he will be ready once again to say that he accepts what we told him.
It is probably right, in relation to free depreciation—we shall, of course, need to give careful consideration to this matter before my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) addresses the House


tomorrow—that in such a year there should be a general incentive, bearing in mind the state of the economy and, above all, the magnitude of the recession and the rate of unemployment with which we must deal.
It is such that this is a year when the right hon. Gentleman could take a chance in this connection. He was, however, the first to say, when he made his announcement this afternoon, that one of the arguments was the narrowing of regional differentials, which is why he announced the other regional changes.
We must ask the right hon. Gentleman in regard to the regional changes that he has announced—we welcome some of them at any rate—whether all his proposals would be acceptable and allowable under the rules of the Common Market as they are tightening up in respect of regional policies.
The whole House will, of course, welcome the right hon. Gentleman's decision to increase pensions. Today pensions are, despite last October's increase, no higher in value than they were in October, 1969; and it is clear, considering the erosion that will occur between now and October, that 15s. in old money or 75p in decimal currency will not be very much.
I understood the right hon. Gentleman to say that this will be paid for mainly by contributions in equal amounts. I believe that he was indicating that 82 per cent. of the cost would be paid for by contributions from employers and workers.

Mr. Barber: A large proportion will be paid by employers on this occasion; the Exchequer contribution will remain the same at 18 per cent.

Mr. Wilson: That is how I arrived at the figure of 82 per cent. I am obliged to the right hon. Gentleman for that correction.
I think that this year there is a case, considering what the right hon. Gentleman has available and what he needs to make available, for having at any rate a short period with a higher Exchequer contribution, knowing that in the matter of pensions every penny awarded conies into current expenditure and, therefore, helps to stimulate the economy in a way which, for example, tax remissions on the highest incomes do not.
We welcome the right hon. Gentleman's announcement about bequests to charities. The widow's relief for the matrimonial home has been widely canvassed, and as the cost of houses increases all the time—it now stands at an almost ruinous rate; the cost of house valuations is also going up—there is a serious burden on the widow and, in some cases, on the widower.
In looking at the question of negative income tax, it is fair to say that this matter has eluded the ingenuity of successive Chancellors. We shall study the Green Paper, and, if the right hon. Gentleman feels that he now has a scheme which looks as though it might work, then we agree that he is right to refer the matter to a Select Committee, and we shall support that proposal.
It is to be expected that income tax will be used to make the major attack on the recession. I am sure that it is right not to do it by the standard rate but to attack it by allowances, especially at the lowest levels. We appreciate the speed with which the right hon. Gentleman is anxious to make this attack—I am not referring to the magic date of 3rd May—and the need speedily to attack the unemployment problem.
This means a big variation in the amount of relief between some of the higher incomes and the lower ones, and this will be an issue to which my right hon. Friend the Member for Stechford will be directing his remarks tomorrow.

Mr. Barber: If I have understood the right hon. Gentleman aright, perhaps I should make it clear that the improvement in the allowances gives precisely the same amount to everybody above the new threshold. In other words, the surtax payer gets no more than the standard rate payer.

Mr. Wilson: I am glad to hear that, and I have no doubt that there will be tables showing the figures.

Mr. Barber: Of course.

Mr. Wilson: Obviously, we have not had a chance to examine these tables. My right hon. Friend the Member for Stechford will be dealing with this issue. Meanwhile, I thank the Chancellor for his intervention.
We shall look with great care at the right hon. Gentleman's share option proposals. Many of us will start with deep suspicion about the relief for bank interest, particularly at a time when there is a great deal of borrowing from the banks which is going not to industry but to individuals for property speculation and to buy land and force up land prices.
I must make it clear that we shall give total and unremitting opposition to V.A.T. The right hon. Gentleman will be aware of our views on this. Our reasons have been clearly put by my right hon. Friend the Member for Stechford, my hon. Friends and others in past debates, both before and during the last General Election. I was not certain from his speech whether the right hon. Gentleman's V.A.T. proposals will be incorporated in the Finance Bill or in a separate Measure this summer.

Mr. Barber: The proposals will be in this year's Finance Bill.

Mr. Wilson: I am grateful for that information.
I have congratulated the Chancellor on the cheers he got from his supporters. I have noticed in recent months that they have been a little more hard to come by and a little less full-throated when Ministers have been addressing the House. There can be no doubt, however, that the right hon. Gentleman received such cheers this afternoon, and they must have been extremely agreeable to him.
Those cheers would have been more agreeable if these generous tax concessions and the other changes which the right hon. Gentleman has made had come as a result of, shall we say, the Government's stewardship of the last two years and not as a result of panic necessity to spend our way out of unemployment.
At the time of the last election hon. Gentlemen opposite were going to reduce taxation by reducing expenditure. They have not done so. [Interruption.] They had a little try early in October, 1970, with school milk, prescription, school meals, museum charges, and the rest—including, of course, investment grants—but that is not the reason why the right hon. Gentleman has been able to make such dramatic and spectacular announcements today.
What is happening now, of course, is that the 1 million unemployed—many observers say that, in real terms, there are 3 million unemployed, representing about 10 per cent.—have made it necessary for the Chancellor to take this action.
In a speech which was hailed with great enthusiasm by hon. Gentlemen opposite, last year the Chancellor told us that his measures would increase national production to the rate of growth of productive potential; but they have not. In my remarks after the Chancellor's Budget Statement last year I warned him that it was a Budget which would not look the same, despite the enthusiasm of his hon. Friends, two or three months later, and indeed, it did not. It was within about two months that the Government lost the Broms grove by-election, and within six weeks suffered the biggest reversal in local government elections at any time since the war.
More important, I warned the right hon. Gentleman a year ago that it would not increase production or reduce unemployment. When I quoted the old gag about it being more difficult to push a piece of string than to pull a piece of string, hon. Gentlemen laughed and jeered last year. But the right hon. Gentleman has been trying to push that piece of string ever since, with Budget and mini-Budget, and he has failed. Now we have a million unemployed, which the Conservative Party denied would happen but which we forecast would happen by January of this year. Indeed, it was within six months of that Budget, in July last year, that he knew he had failed and had to produce a mini-Budget. He promised that that would have an effect on the unemployment figure in a couple of months. We know that that estimate has proved wrong. That is why, belatedly, he has to move on so large a scale today.
The House will form its own view of whether what the right hon. Gentleman has now announced is adequate. Certainly it is much too late to have avoided the social misery and hardship caused by the right hon. Gentleman's failure to act in time and adequately last year. He knows that what he has done today is against the background of the heavy unemployment figure, of the highest ever juvenile unemployment since the war—70 per cent. up over the last year—of investment at the lowest ebb for years and 10 per cent. down on last October-December,


and of industrial production, from the figures published last week, no higher than it was in the spring of 1970, two years ago.
The right hon. Gentleman knows that, in addition to the steps he is taking in relation to the cost of living, a big rate increase is coming next month. He knows that the wholesale price index is turning upward again, and that we have the twist of the inflationary spiral through the Housing Finance Bill, and the Scottish Bill, which I was very surprised he did not announce today would be dropped from further progress in the House. The right hon. Gentleman has house prices rocketing 21 per cent. in London and the South-East over the last year, and farm land prices. We have all these factors, and the prospects of V.A.T., on which we shall be asked to legislate.
Today's post-Budget euphoria will pass, except in Central Office legend, as it did last year. In a panic the right hon. Gentleman has done some good things, and we congratulate him on that. He has done nothing to cure the debilitation, the anaemia, that he and the Prime Minister have brought to British industry, British workers and British society.

5.53 p.m.

Mr. Wilfred Proud foot: Before congratulating my right hon. Friend on his Budget, I have some words of pity for the Leader of the Opposition, whose task gets more miserable each year of this Tory Administration.
My right hon. Friend the Chancellor Budget in the Guinness Book of Records, must surely be included after today's The total boost that he has given the economy is absolutely correct. He will earn the title "The first of the big spenders". This is right in our economic situation as it is today.
Before the debate, I bothered to go to the Library to dig out the prognostications of the T.U.C. before each of the last three Labour Budgets. It is most interesting to see their recommendations. In 1963 the T.U.C. wanted a wealth and gift tax. In 1969 the T.U.C. wanted a wealth tax. In 1970 the T.U.C. wanted the threshold of income tax to start at £11 a week, because then the point at which people started to pay income tax was £6·25, and the T.U.C. was very worried in 1970

about the 600,000 people then unemployed. I can only say that the T.U.C. should look at its previous declarations and at what the present Tory Administration have done in 18 months and decide which side its bread is buttered and who is giving it the best deal in life.
I am sure that everyone will be delighted to see how the Government are taking up the recommendations of the Bolton Committee. It is not just a matter of helping the small men in business, important as that is, but it really matters for the areas of high unemployment in the regions. The Bolton Report pointed out that small businesses employed a larger number of older people in proportion and a larger number of women. In today's context, that is very important.
Today the House looked rather thin for a Budget Day; the Gangways were empty. I suppose the occasion was discounted by the Press. We have not been talking about whether we should have growth or not. The Chancellor has gone quite correctly for growth. In that he is completely right. I was delighted by his aside about the new belief amongst journalists and people in the media, and the carping about, "If we have growth we shall hurt the environment." The people in the media, all probably from higher income groups, all certainly from higher education groups, do not know what it is like to be a worker in this country. We will raise their standard of living. When they sit in their ivory towers and say that we must have no more growth because our environment will be worsened, they are men with red flags in the way of the van of progress. I hope that the Budget has put them firmly in their place.
The forecasting takes place in the Treasury and nightly in all walks of business-life and is never totally accurate. The more one is involved with forecasting the more one realises that it cannot always be 100 per cent. accurate. The politicians are more lumbered with this problem than any other section of the community because if they make a forecast it is automatically taken to mean a promise of performance, and that can never be right.
When I read the Economist, the Financial Times, and so on, and see that the National Institute for Economic and Social Research has a model of the


economy and that the Treasury also has a model of the economy—I remember my right hon. Friend the Foreign Secretary was chided for having a box of matches to work out what would happen to the economy—I suppose that in this respect they are virtually electronic matches! But I have an awful feeling that business and government have never really utilised computers yet.
They should use them on the possible alternatives when they play with their models. Another of my fears is that they do not believe what the computers tell them when the computers try to forecast the future.
I am sure that my right hon. Friend the Chancellor of the Exchequer today has kicked the computers in the seats of their pants and has played his hunches. He is completely right to do exactly that.
Regarding the theatrical content of the annual Budget, I have spoken out many years ago against an annual Budget. In a complex society such as ours the economy should be capable of alteration during the year, and my right hon. Friend has done that.
The public are absolutely bamboozled by this. The party opposite pushed taxes up and up. As Budget day approached the man in the street anticipated it with fear and trembling. He did not really know why the taxes were being taken from him. I am sure that now that these huge tax cuts are coming he is just as mystified as to why we, in 18 months, have been able to chop taxes as much as we have done. Perhaps that is a simplistic way of looking at it. But I should have thought that that was how people feel about it, and that economic management is beyond many.
I am delighted that my right hon. Friend has gone in for incentives—to use them in business, towards economic growth, and for people at work. The income tax cuts are the ones that matter every time. I look forward to 3rd May with anticipation. This will help not only growth but also in getting rid of unemployment.
I bothered to check on some figures today which are meaningful. I am surprised that hon. Gentlemen opposite did not welcome the tax cuts. They shouted, "What about the unemployed?" Let

me tell hon. Gentlemen opposite—as the Tatler called me a grocer—just exactly how this will work.
I will give some examples. My daughter is aged 18 and earns £12 a week. She started work six months ago and now pays £1·18 tax, which is 9·8 per cent, of her income. A married woman I know, aged 23, earns £13·75 a week and pays 12·4 per cent, of that in tax. If she earns overtime she pays 29 per cent, on that section of her earnings. I take these examples because I know them personally. It makes the subject much more interesting to personalise the figures rather than look at dry statistics. A married woman in the same kind of job earns only £5·52 and pays no tax. She refuses to work more than 20 hours a week because she then immediately has to pay income tax on the full week's pay at the rate of 8·9 per cent. of her earnings. A 26 years-old single girl who earns just over the average of £28 a week pays £5·99. In this case 21 per cent. of her income goes in tax, and if she works overtime for which she is paid £2·40 this increases to 30 per cent.
The tax cuts which the Chancellor has announced will help enormously in this sector. What will these people do with the extra £1 in their pocket, which is virtually what every taxpayer in the country will have? Again, I give my daughter as an example. She is a spender. All youngsters axe. Thanks to the Chancellor's purchase tax cuts, with the range of cosmetics, clothes and the kind of things that young girls buy, she will spend money on these things. She will buy goods and services with her extra money like all young unmarrieds and in this way the Budget will help production and job creation. I was delighted to hear the Chancellor say that yesterday's luxuries are today's items of normal consumption. I will not say what people should or should not buy. But the whole package from the reduction of direct income tax for the lower paid to the reduction in purchase tax on what were called luxuries to the rate of 25 per cent. is a real boost to the economy. I hope that we shall be able to go further along the road to reduce direct taxation, because this country has a perk-ridden society, where perks matter more than money. I want to see people with a high take-home pay deciding for themselves what to spend their


money on. They will dictate to the market and they will choose the new growth industries of this country. Their tastes will be satisfied and from a European point of view that is exactly as it should be.
The young married people are purchasers not just of houses but of consumer durables, and this is important for employment. If they are able to buy more consumer durables, production will rise. The older element—the over-50s—whose children have left them, are the savers. It almost worries me to see the amount of saving that is done, because I feel that people should have spent their money to create jobs. But it is a juxta-position, because the saving has enabled the Chancellor to give bigger cuts in taxation. This new term which has sneaked into the language of economics—"leakage into savings"—is a comic expression.
Direct taxation is the barrier to an economic miracle. The Chancellor has stormed that barrier today, and I am delighted. He has paid attention to the low-paid workers and has given firms the ability to offer incentives by way of share options to management. People in management must stand up and be counted. They cannot blame anyone but themselves for poor performance, and they should not try to shuffle off the blame for poor performance on to unions or Government. There will be even more competition, and I hope that share options will encourage these men to do their best.
I am delighted—as I am sure is the rest of the Conservative Party—at the proposals for reverse tax. The social change and revolution that this will bring about will stagger us all. Many people talk about the scroungers on the National Health without knowing what they are talking about. The so-called scroungers are a minority. The ordinary man in the street has no conception of the incredibly complex and detailed way in which social security works. The more I sit in my surgery and meet people the more I realise that a tiny segment of "professionals" know more than any hon. Member about the way in which these systems work. I look forward to the day when everyone will fill in his own tax return and when the next-door neighbour will not know

whether he is a recipient of tax credit or whether he is paying tax. That is as it should be. The system should help those who need it, and it must be absolutely correct.
I campaigned for free depreciation with the Chancellor, and I believe it is completely correct. A year ago I suggested that free depreciation could be at the rate of 150 per cent. in the regions, but I am sure that what my right hon. Friend has done and the way he has done it is absolutely correct for regional policy. The T.U.C. could do more to help the regions than any other organisation, but I doubt whether it ever will, because it would mean getting rid of that sacred cow—national wage negotiations. There are differentials between what a man will earn for an identical job in the South-East, in Scotland, and in the North-East. If this was spelled out in black and white at the start of any wage negotiations I am sure that industrialists with labour-intensive industry would look afresh to the regions. Life has much to offer the individual worker in the North-East—which I know best—Scotland and Wales. Traffic problems—for example the number of traffic lights that have to be crossed, and the quality of the roads—are not as bad as in other areas.
I would be horrified to be a worker in the South-East, and to have to face all the traffic confusion and the lower quality of life. I therefore make an appeal to the T.U.C, although I do not expect it to be taken up. By its action it could be one of the greatest elements of help for the regions, and, at the same time, it would be helping the economy and trade unionists and workers. I am convinced that the Bolton Committee report has a great deal to offer in this respect.
I must admit to one disappointment, namely, that the tax on fuel oil has not been cut. I asked for this to be done last year. I am sure that if we are to achieve the rate of growth we need as we go into Europe we must have a fuel policy that recognises that oil and natural gas must have their rightful place. There is no excuse for keeping fuel tax for import-saving reasons. After the coal strike it is more necessary than ever to say that.
I do not believe that the Opposition should make too much play about the value-added tax. I see that President Nixon is now looking at V.A.T., and


perhaps America will adopt it. In view of the tax system generally and the great barriers to incentive created by direct taxation, surely it is better to let people keep their earnings, and to take taxes to pay for the things that we need—suchas roads and hospitals—in the form of a percentage on the goods they buy. I am slightly amazed, with the amount of zero rating that the Chancellor has announced, that he still needs a rate of only 10 per cent. to achieve the necessary out-turn. It gives me great heart to think that the value-added tax is such a small percentage. It is the tax of the future, which will be the best for our country.
I congratulate my right hon. Friend most heartily. I must call him a revolutionary Chancellor. I am sure he has started the economic miracle today.

6.10 p.m.

Mr. Robert Woof: In following the hon. Member for Brig house and Spenborough (Mr. Proud foot) I must stress that I have always realised what a great ordeal it must be for the Chancellor of the Exchequer to introduce his Budget and brace up his nerves to present the right side and the left side of the nation's balance sheet.
The presentation of the Budget is undoubtedly a time of great parliamentary activity. The care and administration of public funds and the control of expenditure are necessary elements in the life of government. The collection of revenue also forms a fundamental part. Governments have always had a hard task in meeting their financial obligations. It is also obvious that no phase of Government activity causes greater controversy, even though in the course of life the majority of people are profoundly affected by the Government under whom they live.
We always wish to recognise things in their true existence and in terms of the relative truths that we have to face, but it appears that the general mind is becoming more and more preoccupied with tremendous problems. However high or exemplary wishes or ideas may be, conditions of rivalry and strenuousness in economic and social issues have never before prevailed to the degree they have now reached. Even though the average political mind which is in favour of any-

thing which it really believes to be for the improvement and uplifting of society and endeavouring to obtain a fundamental grasp of the problems which human society presents will probably find that there is one point at least at which its attention tends to become concentrated, it should be on where they stand—as it were, between man as a member of society, endowed with reason, or all the brute creation that exists or has gone before them. However much we may hesitate to acknowledge it, I am reminded of the late Lord Keynes, who described the men he saw in the corridors of power at the time of signing the Versailles Peace Treaty in 1919 as a lot of hard-faced businessmen who looked as if they had done well out of the war. I admit that nothing can be more out of place than comparisons which were instituted between society 50 years ago and at the present time.
Wealth may accumulate, and public and private magnificence for some may have reached a point never attained in the history of the world before. But by and large this Budget to me is a businessman's budget. We learn of the knights of capital of the Stock Exchange, who must really be delighted. Those who profit are the organisers who set the machine to work, those who pull the levers, those who study its pulses and know its wants and those who divide and govern—and the world works so that they may grow richer.
But as we come to consider the performance of the Government, Lord Keynes's description seems to fit the Government very aptly. They have conducted their economic policies as if they were fighting a war, not for the welfare of the people of Britain as a whole but against the wage-earning classes in general and organised labour in particular. In this war, they certainly think they have scored victories, and on this Budget day their troops have turned out in force to applaud their general, who has even been able to give away a few spoils of victory, with many ripe plums of every description for practically everybody.
But with many battle cries ringing in our ears there are many in this country who are wondering whether this sort of war is the right way to run the economy. Amongst other noteworthy aspects—and


the Chancellor mentioned this time and time again this afternoon—there is the effect of the recent battle of the miners' strike. That cannot be regarded as a success by the Government. Company profits have been hit, and the direct cost to the Exchequer alone was enormous. Over £5 million, we were told, was paid out in supplementary benefits to miners' families, and this of course was only the most direct item in the cost, notwithstanding the loss of output and industrial working on short time.
The miners solidly demonstrated that modern industrial society cannot function without their labour. They had first claim on our society before the speculators who dominate society.
It is typical of the warlike attitude of this union—bashing Government. Some supporters of the Government reacted to the announcement of that cost with a call for more warlike measures still, a reduction or even a total stoppage of supplementary benefits to men and their families during a strike. As my hon. Friend the Member for Rotherham (Mr. O'Malley) pointed out, their policy is one of starving people into submission. But the miners certainly demonstrated how to bore holes in the Chancellor's statement on 9th November last year, when he emphasised:
As the House knows, the Government decided that the most effective way to stop the runaway inflation was to impress on all those responsible the paramount need for a progressive reduction in the level of pay settlements, and the Government remain resolved to stand firm on reasonable pay offers where our own employees are concerned.
Then he added these most significant words:
We shall not be intimidated by threats of industrial action into buying peace by excessive settlements."—[OFFICIAL REPORT, 9th November, 1971; Vol. 825, c. 853.]
On these facts one would have thought that the endeavours and concern of a much shrewder Conservative Minister of Labour, the late Sir Walter Monckton, might almost be said to belong to a different generation of Tories. In his day—and to a much greater extent under the Labour Government, labour relations and the management of the economy, even in spite of what was imposed on that Administration by the economic situation they inherited—it can be said that the economy was a matter for co-operation and not confrontation. When a major

industrial dispute broke out, the Ministry of Labour was straightway concerned, and did its best to bring the parties together. The T.U.C. was encouraged to use its good offices. Conciliation officers at the Ministry would arrange a marathon series of meetings, and every effort was made to bring about an amicable settlement.
When the present day is contrasted with the past, perhaps one of the first things that arrests our attention is the Government's idea of managing the economy. Conciliation officers might just as well join the industrial reserve army—the unemployed—for all the scope that they are given. It was not until the loyal and devoted members of my union clearly demonstrated that they would not allow themselves to be crushed by this Government that the Secretary of State for Employment intervened and proposed a court of inquiry. We all know the outcome.
What also has been disastrous in Tory warfare in economic management is the most obvious result on the industrial battlefield covered by over 1 million unemployed. That is one of the most terrible aspects that alarms us so much when we think of the future for the unemployed, particularly youths whose disastrous start in life is consigned to idleness meaning that they are early enmeshed in its attendant evils. I have had plenty of this in my time. This is closer to the gates of Hell than anything else I know. It is a disgraceful result of the present Government's economic policy. It is a stern fact of life which we have to take into account and the operation of which we remain powerless to escape. Practically every hon. Member has been deeply concerned about rising unemployment. Even the Chancellor this afternoon admitted quite openly that it is something which no Government can tolerate. We may now be able to see a way out as the Chancellor's sundry booster measures, which are so badly needed, are applied in many regions of the country.
I confess that I was rather disappointed that the Chancellor did not announce the setting up of a high-powered new regional development authority to stimulate industry. However, we must be thankful for small mercies, and we accept the volte face over the investment grants


system to provide investment funds for plant and machinery and to attract new industries to reduce the level of unemployment. In my area that will be greatly welcomed. For years on this side of the House and from the opposite benches I have advocated replacement industries for those which have been obliterated. If this Government had not come forward with a policy to attract new industry, they would have had to order about four million tons of grass seed and experts to sow it over coalfields. That is about all that we could have expected.
I accept that if the strategy is to succeed it will take time to resolve to tackle the unemployment problem. This is something which cannot happen overnight. I accept all that. It is something for which the Government must take responsibility in switching from the previous Government's policy of investment grants and thereby creating lack of business confidence and the unemployment which has arisen out of it. The conflict, which perhaps is the most ironic and bitter aspect of the Government's whole policy, is that caused by trying to combat inflation by holding down wages in the public sector, and that may be totally irrelevant.
Dr. Charles Levinson, in his recent extremely carefully documented book, "Capital, Inflation and the Multi-Nationals", has shown that wage increases have, for the most part, only a minute effect on price increases, which are mainly caused by the insatiable need of large and increasingly multi-national companies for more capital as labour continues to be displaced by automation, involving increasing amounts of capital invested. This process is bound to continue and intensify and the effect of wage increases on increasing prices will become even more marginal.
This is not just a guess; it is supported by facts and figures. The Organisation for Economic Corporation and Development, for example, produces statistics for member countries each year showing movements in wages and prices which bear out this point. Perhaps the most dramatic are those for Japan where wages increased by no less than 72 per cent. between 1967 and 1970 but wholesale prices increased by only 7 per cent. The reason was that production per worker

rose by 65 per cent., due to the increased capital investment put into Japanese industry, largely by the Government, who were concerned with managing the economy and not with sniping at "lame ducks".
It is not wages rates which are the prime factor in modern methods of production—it is capital. As the Wall Street Journal, which is anything but a Left-wing newspaper, put it:
Labour costs aren't the Frankenstein monster they're cracked up to be,—it is a fact that pay to workers has been getting bigger, but also that labour costs increases have been getting smaller. In the last few years labour costs have been declining to a point that in the last three months of 1971 the index has barely budged, rising a miniscule one-fifth of 1 per cent.
This trend seems conclusive, but of course the Government are apparently not interested in whether or not wage increases are the cause of inflation. They are concerned with stopping them in any event as part of their general policy of "union bashing". It is this approach which will mean that those who are restless in such a high-pitched life will have no desire to endure such policies. Throughout history the centre of power has moved gradually, where men have been trained for the rivalry of life in the strenuous conflicts in which they have acquired energy, courage, integrity and those characteristic qualities that contribute to a high state of industrial and social efficiency.
But how can one have confidence in a policy which is satisfied to see company profits rise by 24 per cent. as they did last year while insisting that wage increases should be restricted to a 7½ per cent. norm, or which abolishes free school milk while increasing the subsidies to fee-paying pupils at direct grant schools. Or is it any wonder, for what is in store for a great number of people having to meet the fearful housing shortage, and by drastically reducing the subsidies on council houses, which will to all intents and purposes, be an electric spark that will on average more than double the rent? The tenants, who are the wage-earners, will by then be spending a high proportion of their income on the higher rents, which in turn will impose further problems on wage demands, while at the same time the Government claim to be fighting and controlling inflation.
The Chancellor said something about vision. I could not catch his statement fully with the hubbub going on around me. I believe that there is nothing more real or more practical than vision, but I am very much afraid that there is nothing more unreal or unpractical than to fix one's eyes on the ground under one's feet and never lift those eyes and see what lies beyond and above them.
Therefore, as the National Institute for Economic and Social Research warned in its pre-Budget survey:
The effect of both tax-cuts and increased investment is neutralised if there is a lack of public confidence in the development of the economy.
It is as simple as that. Only time will tell whether this public confidence will be upheld—more particularly when the Government bulldoze their way into the Common Market, with all the consequences that will follow. But believe me, they will not do that with my support.

6.32 p.m.

Mr. Spencer Le Marchant: When the Chancellor of the Exchequer presented his Budget last year, I felt that it was the most important Budget that I could remember. I felt it particularly important because it planned not only for the year ahead but for a Parliament; it planned for the several years which the Government had ahead of them. I regard this Budget as far more important because in its very conception it is planning not for this or the next Parliament but for many years ahead. It is progressive because it gives to industry and all of us a picture of where we are really going. We were told something about that last year, and I think we have been told a great deal more today.
I am sure that the Budget will be welcomed in the City and by the investment trusts. I am sure that it will be welcomed by industry. Some of the best aspects are the tax allowances. Free depreciation is not something that will come to a stop next year; it will go on until 1978. How much more helpful that is than to introduce something which might be changed next year.
We all want more production. We all know the fear of inflation—too much money chasing too few goods. We all

know how hopeless it is to have wage rises which are immediately followed by increased prices in certain sectors. I believe that there is no sure way of making certain that the measures in one Budget are necessarily absolutely right for the country because there are so many international influences, but we do know when the measures are right, and I suggest that in the circumstances those put forward by my right hon. Friend today are absolutely right.
Until this last year we have had a poor performance in the international league. Our growth has not been very good. We are still suffering from the low rate of investment in our vital industries. However, this last year has shown an upturn; the rate of inflation has halved; we have repaid large sums of money abroad; we have a record surplus. But when one thinks of all these things which have been so good for the country in the last year, one also thinks of the terrifying effect on the country as a whole of the coal strike.
The hon. Member for Blaydon (Mr. Woof) is a miner, and he is proud of that. I am a Member of the Stock Exchange, and I am proud of that. I believe that the Stock Exchange, with all it does for the country, does every bit as much as the miners. It does these things for industry, in finding money which provides employment. The hon. Gentleman and I both have the same sort of things to do and do things our own way. I do not accept that this is a bad Budget, that it is a Budget which does not help every single person in the country.

Mr. Woof: I did not say it was a bad Budget. I said that by and large it was a businessman's Budget, which is a different thing altogether.

Mr. Le Marchant: I suggest that it is a Budget which helps the regions a great deal; it helps the individual by the change in the personal allowances so speedily at the beginning of May, quicker than ever before; if helps them through the purchase tax reductions, and that is not only for businessmen; by exempting many millions of people from tax; it helps by increasing pensions. This is a Budget for the people. It is a Budget which the people of Britain wanted. It is a humane Budget, and I applaud it for its far-sightedness.

6.38 p.m.

Mr. Laurie Pavitt: It is perhaps a little surprising to me that I should be following the hon. Member for the High Peak (Mr. Le Marchant), because, like him, I, in my dark and mysterious past, was on the floor of the house—but not this one. I had the experience at a young age of being on the floor of the Stock Exchange for a short while but made my escape, for which I am thankful.
I am not as enthusiastic about the Budget as the hon. Gentleman is. Nor can I indulge in the excitement, enthusiasm and euphoria of the hon. Member for Brig house and Spenborough (Mr. Proud foot) about it. We have all seen Budgets received in this House with verying degrees of acclamation or praise, and in the long run we have learned to have some sympathy with Chancellors of the Exchequer who have to face this ritual dance every year, with all attention focused on it, and have to try to get some sense out of a complicated system.
Each Chancellor plays "put and take". What makes it more difficult for hon. Members as the years go by is that, whereas once upon a time it was "put and take" only at the time of the Budget and the Finance Bill, now many other factors have to be taken into consideration. So we rejoice that there has been a Father Christmas type of Budget this year, and that this is one of those years when there is more "put" than "take".
At the same time, as my right hon. and hon. Friends have reminded us, what is given in one area of financial policy is very often countermanded in another. We are all able to rejoice that personally we may have an extra £1 a week in our pay packets, but we are also aware that the family man finds himself paying increased prescription charges, more for school meals and other increased charges, and that under the Housing Finance Bill council tenants will rapidly see much more than their £1 swallowed up in highly increased rents.
We have seen a phenomenal rise in land and house prices. This has an effect upon the economy and the way people spend money. One of the mistakes we make is to think that the Tories are not flexible. They are amazingly so when it comes to self-preservation. We have witnessed a complete change in

their policies. This afternoon they have not described them as "investment grants" but at least on regional policy they have returned to the system about which they were so rude when they came into office. We are pleased that they have seen the light, and congratulate them for following us and for now adopting a system which we pioneered.
I was concerned about the underlying philosophy of the Chancellor's speech. There are easy phrases which all politicians can use so well when we talk against taxation. No one likes to be taxed. The Chancellor said that we have been taxed too heavily and for too long. That is the kind of phrase that will have everyone in the saloon bar and the public bar nodding his head and saying, "Hear, hear." This is the wrong philosophy. The Chancellor has the responsibility of getting the economy on an even keel, but he has another responsibility. Individually we cannot afford to pay for education, to have more teachers and smaller classes, more general practitioners, more nurses, physiotherapists, more screening for cancer, more spent on medical research unless we have the Chancellor acting as the agent for the people.
The Chancellor's approach to the Budget was adolescent on the fiscal side. Taxpayers are grown-up people, and there is no reason why he should not have put fairly and squarely the point that if we want more schools and hospitals it is not possible on the one hand to have a £1,000 million bonanza and on the other hand to say that there will be increased spending on health and welfare activities and upon the chronic sick.

Mr. Nicholas Scott: The hon. Gentleman is treating us as though we were naïve. Of course rates of taxation can be cut as long as by doing so growth in the economy is stimulated. The extra rate of growth produces extra revenue and more things can be paid for.

Mr. Pavitt: Many years ago my party made a great mistake about this. We said that all we had to do was to increase growth and everything would be all right. It is not just a question of increased growth; it is a question of what is done with the growth. I refer the hon. Gentleman to Tawney's


"Acquisitive Society", chapter 1, where most of this is dealt with at great length.
I am a member of the Co-operative group in this House, and I welcome two points the Chancellor made. The Co-operative movement is a consumer movement, nearly one in four of the population being members. It is the largest grocery retail organisation in the country, owned by those who shop at it. I welcome the comments of the Chancellor about taxation changes for those non-profit making organisations registered not under the Companies Act but under the Industrial Provident Societies Act. I look forward to studying the Chancellor's statement more closely and in the ensuing debates to hearing more about the way that this will work.

The Financial Secretary to the Treasury (Mr. Patrick Jenkin): The Financial Secretary to the Treasury (Mr. Patrick Jenkin) indicated assent.

Mr. Pavitt: I am glad to see the hon. Gentleman nodding. Obviously, in the allocation of duties this one has fallen to him. I always enjoy listening to him. I remember his lucid explanations on the occasion when the Finance Bill went upstairs into Committee. I enjoy listening to him on financial matters despite the fact that he is such a hidebound Tory in politics.
Both sides of the House will look forward to examining in greater detail the problem which the Chancellor has grasped through the institution of V.A.T.—an abhorrent tax meaning a shift from direct to indirect taxation. That is a bad thing. I prefer that those who can best afford to pay a tax should pay it—taxation of means and not of needs—rather than taxing that which people need to eat. I am glad to see that food has been exempted.

Mr. Patrick Jenkin: A moment ago the hon. Gentleman said that V.A.T. meant that we move from direct to indirect taxation. He must have forgotten that the Chancellor pointed out that with the exemptions and zero ratings and the ratings foreshadowed there will be less V.A.T. levied than is the position with purchase tax and S.E.T. now.

Mr. Pavitt: I noted that with care, but this tax is being introduced for the first time. It will become a permanent part of our taxation system, and I shall be

surprised if future Chancellors do not see it as being something which can be extended. The Chancellor has naturally made it as palatable as possible at its inception.
The Chancellor has grasped the problems that will face retailers holding stocks upon which they have previously paid purchase tax. I welcome the statement that his mind is not fully made up on the matter of adjusting in some equitable fashion the double taxation which would arise. He has announced that he will consult those who have the know-how in dealing with stocks and distribution. If I may speak on behalf of the Co-operative movement, I can say that that body of consumers, retailers and wholesalers would welcome the opportunity for consultation. It has a 100-odd year experience of the business, and, although it has never had to face this tax, it had to meet purchase tax and many tax changes since which affected retail distribution. I urge the Chancellor to begin his consultations as soon as possible.
I regret that there has been no mention of tax relief for blind persons. In 1952 a Royal Commission recommended that there should be a tax disregard for part of the earnings of blind persons so that they could keep themselves when gainfully employed. Since then there has been a change in the way we treat blind persons. Whereas at one time nearly every blind person who worked was in a sheltered workshop, over the last six or seven years in this area, as in other disablement areas, there has been a move to encourage blind persons to go into the mainstream of the community and industry and seek employment in ordinary commercial or industrial concerns.
It was not until ten years after that Royal Commission that the Chancellor introduced a disregard of £100 on the earnings of blind persons. There has been no change in this since 1962. That £100 is now equivalent to £63. I think, therefore, that while the Chancellor is in a give-away mood this is one of the sections to which he should pay regard; it will cost little on his total revenue, an absolutely neglible amount, and if I do not find it included in some part of the Finance Bill I shall have great pleasure in trying to move an Amendment to give blind persons the justice they deserve.
The other point concerns another section of the community who are disabled; namely the partially deaf, the hard of hearing. Under the value-added tax one of the big problems will be that the person who needs a hearing aid in order to continue with his employment will find that unless zero rating is applied to purchase of a hearing aid will attract value-added tax all along the line, on production, wholesale and dispensing. This additional taxation would be very onerous for deaf people. I hope the Chancellor of the Exchequer will find it possible to give a zero rating to hearing aids.
In addition to that, if a person buys tools or other equpiment for his work he is very often allowed capital expenditure relief for taxation purposes, but a person who is deaf but can nevertheless continue his employment provided that he has one and sometimes two hearing aids has no such allowance on the capital he expends. The cost of a hearing aid can be between 25 and 110 guineas; so if a person wears two aids the capital expenditure may be £200. It is a small matter in terms of the total of hundreds of millions of pounds which the Chancellor is talking about, and this is an area in which perhaps some compassion should be shown and a tax allowance given.
The Chancellor of the Exchequer did not mention in connection with value-added tax that as a result of its collection we shall be giving 1 per cent. of the total collected each year to the European Economic Community, which will be another part of the great contribution from this country to swell the coffers of the Six, or the Ten as it may well be if we finally accede. It is quite wrong that when he talks about zero rating for food he should still persist in applying V.A.T. to chocolate, chocolate biscuits and things of that kind. I have a constituency interest here since one of the businesses in it is what used to be McVitie Price and is now United Biscuits. The firm has been writing to me and other hon. Members about this for many months past. Chocolate biscuits may be regarded as a luxury item, but I contend they are not for children and old people. For an elderly person a limited pension the chocolate biscuit with an afternoon cup of tea is a very real com-

fort. I would have hoped that it would have been possible, instead of sticking to the very easy rule that where purchase tax has been charged in the past V.A.T. will be charged in the future, for the Chancellor to make that little concession.
The House has welcomed the way in which the Chancellor has introduced his Budget today. It is always a bit of a marathon for the Chancellor as he goes through each section and gradually reaches the crux at the end, because he has to wait until the Stock Exchange closes before he can put in the tidbits. We shall look with interest at the debate of the next four days and watch what happens. But I say that it is nonsense to imagine that by fiscal means and increased productivity the right hon. Gentleman will be able to solve the unemployment problem, because the better the productivity, the more competitive one is, the more one can produce by automated or mechanical means, the fewer people one needs to employ. That is the point which the Chancellor has not touched upon this afternoon; perhaps he will do so in later debates. We cannot be euphoric about the Budget while we still have 1 million people who are denied the means of earning their daily bread, which means that 1 million families at this present time—possibly 4 million persons—are affected. We shall watch with interest whether this Budget bites into this shameful and appalling state of affairs in the year ahead, instead of yielding to euphoria today.

6.56 p.m.

Mr. Edward Gardner: I should have liked very much to follow the hon. Gentleman in what he has been saying but I have only four minutes left, so I will say generally that I add my voice to the chorus of congratulation which I believe will be heard in this land today as a result of my right hon. Friend the Chancellor of the Exchequer's Statement. This is an admirable Budget, because it looks to the future—to our future entry into Europe. It is a Budget which will bring the kind of confidence that is necessary for the prosperity of this country.
I am particularly happy at the effect that it will have on old-age pensioners. I have in my constituency in South Fylde—and particular in the area of St. Annes on Sea and Lytham, and just to the east


of that area—a large number of old-age pensioners. I cannot help feeling that inflation as we have felt it over the past few years has been a disaster in many of their lives. I congratulate my right hon. Friend on deciding not only to increase old-age pensions and to review them annually but also to make it possible, as this Budget does, for those pensioners who are living on their savings to get the maximum benefit from the interest on those savings. As we have heard, they can now enjoy an investment income of up to £200 without any of the disability that formerly applied to that kind of earning. In addition, there is the absence of tax up to an income limit of £929.
It seems to me that these are benefits of the highest importance, which affect not only the old-age pensioners upon whom my attention focuses in my constituency but those throughout the land. It is right that the Government should encourage people who are coming to retirement to save as hard as they can and to aim at making themselves independent, and should give them the hope that when they have made themselves so independent they can enjoy that independence in the fullest measure. I can see nothing but merit in people who aim at

coming to retirement age with sufficient savings to enable them to enjoy their retirement to the full. But there are those—hundreds and thousands of them—who, try as they will, cannot achieve this accumulation of capital. I am happy to note that for them social security benefits are going to be increased proportionately to old-age pensions.
I should like to refer now to a point that was dealt with by the hon. Member for Willesden, West (Mr. Pavitt). I, for one, support and sympathise with his plea for some kind of tax relief on the hearing equipment used by deaf people. I have two people in my family who, unhappily, were born deaf. However sympathetic people may be, the deaf do not get that degree of sympathy that is given so freely to the blind. I should very much like the Chancellor to consider the possibility of giving some kind of tax relief to people who have to buy this very necessary equipment.

Debate adjourned.—[Mr. Fortescue.]

Debate to be resumed tomorrow.

Mr. Speaker: As it is not yet time for Private Business, the sitting is suspended until Seven o'clock.

Sitting suspended till Seven o'clock.

BRITISH RAILWAYS BILL (By Order)

Order for Second reading read.

Motion made, and Question proposed,

That the Bill be now read a Second time.

7.0 p.m.

Mr. Daniel Awdry: My reason for speaking on the Bill tonight is to try to explain its provisions. I should first say why we are debating the Bill at all. It is usual for Private Bills to be given a formal Second Reading, particularly when they contain nothing of a controversial nature. It will have been noticed that no blocking Motion has been tabled against the Bill. However, as the Bill has been objected to orally on each occasion when it has been called for Second Reading, the promoters have asked me to speak in support of it.
Since the railways were nationalised in 1948, the British Transport Commission and subsequently the British Railways Board have promoted a Private Bill every year, the first one being in 1949. On every occasion on which a Second Reading debate has taken place—and there have been several in the last 20 years—the procedure has been for the Minister of Transport or his Parliamentary Secretary to speak in reply and deal with as many as possible of the points raised during the debate, but it was no one's responsibility to present the Bill or to explain its provisions.
This procedure was traditional for a railways Bill, and appears to have worked satisfactorily, as no criticisms were raised and no attempts were made to change it. However, the last time on which there was a Second Reading debate on the Railways Board's Bill was in March, 1970, and this arose from the tabling of a blocking Motion. On that occasion a statement on behalf of the promoters was sent to all hon. Members, as has been done on this occasion, but criticism was levelled at the promoters during the debate for their not having arranged for the Bill to be presented and explained, although that had not been the practice in the past. However, on that occasion a feeling was expressed that there had been some lack of courtesy to the House and, as a consequence, the

Chairman of Ways and Means made it known to the parliamentary agents that in future someone should be found to open the debate and to explain the powers that were being sought in the Bill. That explains why I am speaking tonight.
The reason why British Railways need to promote Private Bills in Parliament—and this is the tenth consecutive Bill that they have promoted since they were constituted under the Transport Act, 1962—is that when they decide to construct new works they need compulsory powers to acquire the land on which those works are to be constructed.
There is another reason, which is that the British Railways Board is a statutory authority and, therefore, bound by the statutes governing its activities. From time to time, it is necessary to amend or repeal certain provisions of those statutes, and only Parliament can sanction such amendments or repeals.
I will now deal with the Clauses in a little more detail, but quite shortly. Part I of the Bill is preliminary, and it defines terms and incorporates provisions of general Acts for the purpose of subsequent Parts of the Bill.
Part II is concerned with the works. By Clause 5 power is sought to construct a number of works. Works Nos. 1 to 3 comprise new railways to provide a rail link from the board's London Tilbury and South end line on to Canvey Island required in connection with a proposed oil refinery. Works Nos. 2 and 3 are to be withdrawn following a decision by the oil company to provide a pipeline to connect with work No. 1.
By Clause 6 power is sought to stop up a level crossing in the borough of Gravesend, but not until a diversionary road has been constructed and opened and a footbridge has been provided in place of the level crossing. The Clause also authorises the diversion of footpaths in connection with works Nos. 1 to 3.
By Clause 7 power is sought to reduce the status of a level crossing in Lockinge, Berkshire, to a bridle and footway, and to reduce the status of level crossings at Tunstead, Norfolk, at Great Barton, West Suffolk and at Hessay and Bentley-with-Arksey, West Riding of Yorkshire, to footways. Adjoining owners are granted private rights to use the crossings with


vehicles and will be given keys to the vehicular gates. In each case the local highway authority agrees with the proposal.
Clause 8 contains provisions which are all in common form and have appeared in all the special Acts of the board and its predecessors.
Part III deals with lands. By Clause9 the board seeks power to acquire lands for the purpose of the works sought to be authorised by the Bill and for the purposes set out in Schedule 2. By Clause 10 the board will be given an option to acquire rights or easements in certain cases without being obliged to acquire a greater interest. Clause 11 limits the compulsory acquisition of land and easements to 31st December, 1975. The incorporated provisions in Clause 12 are in common form and have appeared in the board's early special Acts.
Part IV relates to protective provisions, and the incorporated provisions in Clause 13 are all in common form and have also appeared in the board's earlier Acts.
Part V is a miscellaneous Part. Clause 14 amends Section 17 of the board's Act of 1970, which empowers a constable to arrest without warrant any person whom he has reasonable cause to believe has contravened or attempted to contravene a byelaw and from whom he cannot obtain a correct name and address. Be fore making the arrest the constable must decide whether the byelaw is one made:
for the safety and security of the railway, the preservation of good order or the comfort or convenience of persons upon the railway".
These words were included in the Section at the instance of the other place. London Transport Executive has been successful in obtaining similar powers of arrest without those words of limitation, and the Clause seeks to bring the board's powers into line with those of the executive.
Clause 15 repeals Section 3(1) of the Southern Railway (Superannuation Fund) Act, 1927. Under present arrangements the contributions of members to the Southern Railway section of the board's superannuation fund rank only in part for income tax relief. To enable members to obtain full relief, approval of the section must be given under the Finance Act, 1970, as a preliminary to which the board has to amend the rules to com-form with Inland Revenue requirements.

These amendments cannot be made to the Southern Region section rules, as Section 3(1) of the Southern Railway (Superannuation Fund) Act, 1927 renders alterations of the kind envisaged ineffective unless authorised by Parliament. This Clause seeks to remove the prohibition so that the rules can be changed as has been done in the other three main line railway sections of the fund.
Clause 16 amends the Act of 1971. Section 30 of the board's Act of 1971 makes provision for the protection of the Harwich Harbour Conservancy Board and the Felixstowe Dock and Railway Company arising from the construction and operation of the extension to Parkeston Quay authorised by the Act and is a consolidation of two separate protective Sections. Since the Section became law it has been discovered that the effect of the consolidation is to create a certain amount of ambiguity of interpretation, and the Clause seeks to repeal the existing Section and to re-enact it in unambiguous form.
The effect of Clause 17 is to apply the Town and Country Planning Act, 1971, and any orders, regulations, rules, schemes and directions made under that Act to development for which powers are sought by the Bill, and limits the planning consent for such development to 10 years.
The hon. Member for Abingdon (Mr. Neave) has indicated to the promoters his intention during the debate to raise certain points arising from the powers being sought in Clause 9 dealing with the acquisition of land in Berkshire, details of which are set out in Schedule 2. I should make it clear to the House that in accordance with the usual procedure this Bill, if it receives a Second Reading, will be referred to a Select Committee whose responsibility will be to hear any Petitions against it and to consider its various provisions in detail. At the same time, the Committee will have regard to any points raised on the Floor of the House tonight, and will be able to consider the explanations given in order to satisfy themselves that the case has been made out by the promoters in support of the Bill.
I am asked by the promoters to give an assurance that all the points raised on the Bill tonight will be most carefully considered and full explanations will be available by the time the Bill is taken


before the Select Committee. In addition the promoters will provide any information which can be supplied direct to any hon. Member who wants it. All hon. Members will appreciate that I cannot deal with individual points on the Bill which may be raised during the course of this debate.
With those few remarks, I hope that the Bill will be given a Second Reading.

7.12 p.m.

Mr. Airey Neave: The House is grateful to my hon. Friend the Member for Chippenham (Mr. Awdry) for explaining this Bill. The position is a good deal better than it was two years ago when we debated a similar Bill, and since my hon. Friend the Member for Tynemouth (Dame Irene Ward) and myself were involved I had better mention this. We complained about it to the authorities concerned with these matters. There was no one to present the Bill at all. I was a strong opponent of the Bill on account of the level crossings in my constituency. I had to introduce the Second Reading. At least we are not in that rather ridiculous position today. My hon. Friend has clearly explained the situation.
I want to deal with level crossings yet again because the Railways Board is always trying to close level crossings in my constituency on the line between Swindon and Didcot. It is proposing to do so again. I would like to refer to these matters entirely. They are of great local importance to farmers in my constituency, and to the passage of traffic at those points in the area of Shrivenham particularly. As my hon. Friend said, they are referred to in Clause 9 and Schedule 2 of this Bill.
The Bill proposes alterations and improvements to the railway line between London and Bristol. One of the reasons is the increase in the speed limit which is proposed for trains along this stretch of line, which has rendered some of the crossings pretty dangerous. At the present time the proposal is that two automatic half-barrier type crossings at Knighton and Ashbury Lane should be closed. The Railways Board wrote to me originally in January and stated that bridges would be provided at both those places. I object to the closure of both those crossings until undertakings are

given that bridges should be built there. I will say why in a moment. I am objecting not only on behalf of the farmer who is involved, but also on behalf of the Faringdon Rural District Council and the Shrivenham Parish Council. We shall hear that they were not adequately consulted by the Railways Board, through no fault of that board, or by the Berkshire County Council, whose fault it was. I wish to refer to that tonight because it is of great importance to my constituents.
I mentioned that there was a farmer concerned. He is Mr. R. L. Sheppard, of Chapelwick Farm, Shrivenham. When the Railways Board wrote to me in January proposing these closures, it suggested that bridges should be built at both those points. I have to mention in passing that under Clause 7 there is also a proposal to close another crossing in my constituency—yet a third—at a place called Butterfly Lane in the rural district of Wantage. No objection has been received by me to that proposed closure, but if one appears, no doubt—as my hon. Friend has just reminded the House—this will be considered by the Select Committee.
The position, therefore, turns upon the Ashbury Lane and Knighton crossings. Certainly the Ashbury Lane crossing is by far the most important for the purposes of what I am going to say this evening. I said that originally the Railways Board proposed bridges at both those places. As an alternative, it also proposed to retain the crossings with widened road approaches and central reservations. Since that proposal was made tome in a letter of January, 1972, the Railways Board has decided—no doubt with very good reason—that central reservations and half-barrier crossings are no longer considered safe. The board also seemed, from what it told me at a conference yesterday evening, to have changed its mind about a bridge at the Ashbury crossing, deciding apparently that the crossing should be stopped up altogether—it will have to get a stopping-up order for that, to which objection could be made—and that it would rely in future on diverting traffic a considerable distance to a realigned railway bridge at Shrivenham. This would be disastrous for a great many people who use the Ashbury Lane crossing, and for my constituent, Mr. Sheppard, of Chapelwick


Farm. From his point of view, it is totally unacceptable, and it will be strongly opposed locally unless an undertaking is given to build a bridge at the Ashbury Lane crossing. There will be opposition to this at the Select Committee hearing.
Mr. Sheppard's position is that his farm is close to the railway, and he has a farm level crossing as well. That is a complication in this matter. My hon. Friend on the Government Front Bench will know that farm level crossings still exist in many places, but they are exceedingly dangerous when trains are coming at high speed and there is inadequate control. The farm is on both sides of the line so that Mr. Sheppard has to cross somewhere. Negotiations between his solicitors and the Railways Board have been taking place since May, 1971, to close the farm crossing which immediately adjoins his farm. The farm is only a few yards away from the railway. The farm crossing is too dangerous. The negotiations have been held up for some time past because the National Trust also owns land in the vicinity of the railway, and it has a right of way over this farm crossing.
This has caused some distress to Mr. Sheppard, who naturally wishes to receive the compensation which he has already been offered by the Railways Board for the closure of the farm crossing. I hope that the board will see its way, with the National Trust, to bring this matter to a rapid conclusion because Mr. Sheppard is in poor health and may be in need of money.
During the negotiations between the Railways Board and Mr. Sheppard's solicitors, nothing at all was said about the proposal to close the Ashbury Lane crossing. At first sight I thought this was an unfortunate omission, but I have had the opportunity of talking to the Railways Board's legal advisers, and I am assured that it was not decided at that time to close this crossing, and that to that extent no one was to blame for the fact that Mr. Sheppard's solicitors did not know this. Having talked to the board's representative last night, I am bound to say that I feel very much easier about the whole situation, as I shall tell the House in a moment.
Mr. Sheppard's farm, which, as I said, has this farm level crossing adjoining it.

is three-quarters of a mile to the east of the Ashbury Lane crossing on the Didcot side of the railway. That is already quite a long way to go to cross to the other side where he has land; that is to say, on the north side of the line. He has 60 acres there, and he wishes from time to time to take his animals from the farmhouse along a track to the Ashbury Lane crossing. He has some distance to go from the Ashbury Lane crossing north of the railway to the land. If that Ashbury Lane crossing is closed without a bridge erected over it, then I calculate and—these are my own calculations—that he will have to take his animals all the way to Shrivenham Bridge a distance of nearly three miles.
There are proposals to carry out works to improve Shrivenham Bridge at a cost of £35,000. This is nearly three miles from the farmhouse, compared with the three-quarters of a mile the fanner has to go to the Ashbury Lane crossing at present. He would have to go into the village of Shrivenham, and with his animals, would have to travel five miles altogether from his farmhouse over Shrivenham Bridge to his land on the north side of the railway. This is unacceptable to the farmer and constitutes a valid objection to the proposal to stop up and to close Ashbury Lane Crossing, without building a bridge there.
The Board acted under the influence of Berkshire County Council, which was not representing the views of my constituents in the matter when it made an agreement with the Railways Board.
My farmer constituent is not the only objector to the proposal to close the Ashbury Lane crossing. There are other objectors through the local authority. There was a meeting in July, 1971, at which the Railways Board's proposals were put to Faringdon Rural District Council and to Shrivenham Parish Council by a Berkshire County Council representative, not by the Railways Board. This is rather like the situation which we had in the debate two years ago when an objector to the Bill moved its Second Reading. On this occasion the Berkshire County Council put the Railways Board's proposal to the two local authorities concerned; namely, the Faringdon District Council and the Shrivenham Parish Council. Both local


authorities strongly objected to the closures at Knighton and Ashbury and demanded that there should be bridges at both places, especially at Ashbury.
It is regrettable that the Railways Board did not meet the local councils but relied on Berkshire County Council to carry out for it the job of consultation. Following the discussions I had with the Board last night, I understand that a different procedure will be followed and that the Board will be going back to the local authorities to discuss matters with them. I certainly hope that that will happen. The Berkshire County Council thought fit to ignore the demand for a bridge at Ashbury, although it reported the local objection to the Railways Board, but it decided itself to overrule the local objections altogether. It agreed to the closure of the Ashbury Lane crossing. Not only was the level crossing to be closed but the lane leading to the crossing was to be stopped up. As I have said, the county council relied on an improved bridge being built at Shrivenham, which is further towards Swindon and would necessitate a long journey for the farmer and his animals.
This proposal would also deprive local people of a crossing at the Ashbury Lane which is used locally by school buses and other traffic. If ever there was a matter that should have been the subject of proper local government consultation, it was this one. However, local opinion was totally ignored by the Berkshire County Council. By overruling local opinion, it has made people really angry, and this is why I have taken this opportunity to take part in this Second Reading debate.
The county council did not tell Shrivenham Parish Council until a very late stage that it had made this agreement with the Railways Board. This was a very unhappy situation and was quite wrong. The county council did not even reply to a letter in which the Shrivenham Parish Council asked what was going on. I regard this as a clumsy and discourteous performance by the county council. I have to say this, much as I regret doing so.
I have already told the House that last night I had a talk with the board's legal advisers and, as I understand the situa-

tion, they feel that, in view of the manner in which the negotiations took place and the way that Berkshire County Council ignored Shrivenham and district, they must go back to square one. I regard this as the only thing that can be done; namely, to hold a proper democratic discussion about the future of the Ashbury Lane crossing. Before a Select Committee considers the Bill, the board must hold a meeting with the district and parish councils and consider this matter. This is the only reasonable thing to do in the circumstances.
I hope this will mean that Ashbury Lane will not be stopped up, but that a bridge will be provided at that point. I understand from the Railways Board that the cost of so doing would be about £76,000. This would be fully justified in the circumstances of the traffic involved and in the light of the situation of the farmer, Mr. Sheppard. I hope that in future the county council will pay more attention to what people think in Faringdon and Shrivenham and will not try to ignore their wishes. This is a bad example of what happens when a county authority ignores local opinion.
I would emphasise that this incident arose through activities of the council's officers and not of members of the council. I do not think the latter were consulted about this matter at all, and I am sure they will be upset to hear what I have had to say tonight.
Schedule 2 in the Bill will also give powers to build an underpass underneath the line at Knighton. This would be a little further along from Ashbury Lane and would be of great benefit locally, and I would seek to support such a proposal. I understand that the land has already been acquired for this purpose.
I support the Bill subject to what I have said, and I would ask that the wishes of my constituents should be borne in mind. I wish to thank the Railways Board for its co-operation yesterday evening in unravelling the situation. I have no further comment to make on the Bill.

7.28 p.m.

Dame Irene Ward: This evening I would much rather be discussing the exciting and wonderful Budget introduced by my right hon. Friend the Chancellor of the Exchequer, but our


parliamentary procedures are laid down and I must observe them. I have blocked the railways Bill for the past two or three months with the object of having this opportunity to state my case. My hon. Friend the Member for Abingdon (Mr. Neave) and I appear to be the only people in recent years to have blocked a railways Bill. It is a good thing that we have made this opportunity available, since there is little chance in the nationalised industries for back benchers to raise objections to their activities.
I listened with great interest to the introductory speech of my hon. Friend the Member for Chippenham (Mr. Awdry). I received a statement of what he was to say on behalf of the Bill, and I was most interested to see it. I was somewhat surprised that he did not refer to the Clause of the Bill in which I am interested. That just shows how things can develop when an hon. Member has to block a Bill. Unless I receive some satisfaction following my efforts at blocking the Bill, I shall block every railways Bill that comes before the House. It seems the only way to protect people's interests.
I was very interested in what my hon. Friend the Member for Abingdon said about his farmer constituent. I am glad that the Railways Board made its peace with him. But I feel that nationalised industries are not nearly sufficiently interested in people. I have no doubt that they are interested in running their industries to the best of their ability. But I mind about people. I am not concerned whether they be Governments or nationalised industries: people must be protected and they have the right to have their case heard in this House.
The Preamble of the Bill says:
…whereas it is the duty of the Board under the Transport Act, 1962 (inter alia), to provide railway services in Great Britain and, in connection with the division of railway services, to provide such other services and facilities as appear to the Board to be expedient, and to have due regard, as respects all those railway and other services and facilities, to efficiency, economy and safety of operation".
It is on that statement that I want to raise what I consider to be meant by "efficiency", and I shall then deal with "economy and safety of operation".
In my opinion—and I am sure that the Railway Board agrees—efficiency depends on having a co-operative and

properly treated number of people working on the railways. By that I mean not only those employed today but those who in the past, have served the railways with great enthusiasm, courage and with ability. They have helped British Railways to become a viable industry. The Railways Board cannot have efficiency unless it pays attention to those whom it employs. That is why I raise this point, and that is why I have blocked the Bill.
I do not know whether there are any proposals in the Bill affecting my part of the world, but for many years I have been interested in the welfare of those who try to exist on small fixed incomes. Whenever there has been an increase in national insurance pensions I have received letters from superannuitants of the railways and the gas and electricity industries. Each time I have written to the chairmen of the three nationalised boards to ask whether their superannuitants will get what is their due, and what has always been their due, as ex-employees of the boards. I am proud that these super annuitants have relied upon me to try to protect them.
On the occasion of the last pension increases I wrote, as usual, to the chairmen of the three boards, asking whether their superannuitants would get the benefit of what had always been done for them since their respective industries were nationalised. In the case of the Railways Board I received a reply which resulted in my decision to block every Bill until I was certain that the railways' superannuitants would receive the protection that they deserve.
The Chairman of the British Railways Board wrote to tell me that the railways' superannuitants were being paid the usual amount that they had got ever since the railways were nationalised. He added that as this Government had decided at that time to review pensions every two years, he could not give me a guarantee that he would be able to protect the interests of the railways' superannuitants in the future. Now that this Government are reviewing pensions every year, probably it is all the more complicated for the Chairman of the British Railways Board.
This Bill does a number of essential things, provided that my hon. Friend the Member for Abingdon has his criticisms dealt with properly. A great deal of


money must be involved. But it makes me hopping mad to think that people who have served the railways in the past may be deprived of the small additional amount to which they would normally be entitled in the event of a national insurance pensions increase coming along.
I shall not go into all the ways in which money could be saved. We all have a good idea of the waste of money that goes on in Government, in nationalised industries, in private enterprise, and in life in general. But when a nationalised board of the magnitude of British Railways says that it does not know whether it will be able to afford to look after the interests of its super annuitants, that has to be challenged at every level, and I have every intention of challenging every Bill until I know that the board can find this small sum of money.
It is only fair to point out that the Railways Board appears to have entered into a new arrangement on pensions for the future. But I am not certain whether the chairman of the board will give any guarantee that when the new pension scheme comes into operation, those who will benefit from it will be able to rely on the board's being able to pay what it is supposed to provide.
A short time ago I had a letter passed to me from the manager of the Corporate Pensions Department of British Railways, dated 7th March, 1972. It reads:
You will see from paragraph (iv) that the Railways Board recognise their moral responsibility towards these pensioners and in their forward planning they are taking account of the cost of possible future schemes of supplementation. The Railways Board hope that they will have sufficient money availble to pay for such increases but they cannot guarantee at the present time that this will be the case.
These people have served the railways very well indeed. I have a great affection not only for those who serve on the railways today but for those who served on the railways during the war. I shall never forget what they did. They were absolutely magnificent. However, for the Chairman of the Railways Board—who had a great deal to say in Opposition about the way that my Government dealt with pensions, and so on—to suggest that if they put this scheme into operation, which, quite rightly involves contributions, they may not be

able to meet their liabilities, is absolutely intolerable and unacceptable. It will not be acceptable to masses of people when they know what is going on.
The bother with this nationalised industry—neither the gas nor the electricity people have raised this point; they have always paid up—is that the public have no idea that the railways' super annuitants may not be paid by the British Railways Board. The only chance that I have of getting my views on the record is to block the Bill. So when this increase comes next year, as was foreshadowed by my right hon. Friend the Chancellor of the Exchequer this afternoon, I shall block the next railways Bill until I know that the super annuitants have been paid. This kind of thing creates a feeling of insecurity among men, and probably women, too. The board has no right to make its staff feel insecure. If employers do not treat their staff properly they cannot expect the kind of support which makes for a good running system.
I was determined to put this point today on the Floor of the House. I do not know whether I shall be able to bring any evidence before the Select Committee when the Bill gets there. However, I do not like the idea of the board, for example, building a new portico at King's Cross—I am devoted to King's Cross; I am sure that it will be a wonderful portico—when it does nothing to ensure that its staff are properly treated.
I want to raise two other points, one concerning economy and the other safety in operation. In my part of the country the coast line, which runs from Newcastle to Tynemouth, carries an enormous number of commuters. British Railways spent masses of money on their intercity lines for businessmen. However, I notice with great interest that when ordinary people, women, invalids, and so on, travel on trains, they cannot get a porter for love or money. Something comes over the intercom. Most businessmen travelling on inter-city lines are very pleased. It is a good thing that they can get to London, do their business, and get back again quickly. They generally have only brief cases with them; they do not have to carry a great deal of luggage. We are often told that when we get to Darlington, Durham and Newcastle the


porters will be lined up on the platform. Indeed they are—but not for ordinary people. The businessmen, to whom I am devoted because of all that they do for the country, can certainly do without porters if we cannot have the railways' super annuitants properly treated.
One station on my coast line had a Victorian cover made of glass, which had to be taken down. That was all right. But the board said that it could not afford to put up another roof. We did not want a Victorian roof. To expect commuters to stand out in the snow, ice, rain and wind which we get in that part of the country is not to look after the travelling public.
I turn now to the question of safety in operation. At Percy Main station the platform has sunk. That platform was built many years ago. It must have been built on coal, because in those days coal was everything. We did not know as much about subsidence then as we do today. Elderly people may be carried in safety on trains, but safety also involves getting in and out of them. The old, and women with prams, cannot get out of trains on to the platform at Percy Main with absolute safety. I should not like to feel that I might sprain my ankle when hopping in or out of a train there.
I have received representations from many people about this problem. I have taken them up with the chairman of the board and the regional managers, or whoever they are. I was told: "Of course the platform has sunk, but we have not got the money to repair it." If British Railways are in such a state that they cannot ensure a safe platform on to which people can alight from trains it is about time that we looked into how they spend their money. My Government take a great deal of interest in my part of the country. If the British Railways Board took as much interest as the Government take it would not allow this platform to be left in this condition because, among other things, it may mean more disabled people with whom to deal. It is absolutely scandalous.
I know that it will be difficult for my hon. Friend the Under-Secretary of State for the Environment to reply to what I have said. However, I am jolly certain that, as he has responsibility, he will talk to the chairman of the board. It is won-

derful what can be done behind the scenes.
I give my hon. Friend and everybody else notice that unless people in the North of England and the railways' super annuitants, who come from all over the country, are properly treated, I shall do my best to block this Bill. The board is apparently to build porticoes, to put in all kinds of lighting and to take it all out again. If the chairman of the board really knew what the public thought he would not sleep comfortably in his bed.
I suggest that my hon. Friend should be very nice about what I have said. I am sure that he will be. If he does not want to say anything—thank God, he is not responsible for the railways—perhaps he will see the chairman of the board and find out about safety on my coast line, and what is being done to protect men and women who have served this country and the industry so well. Of course, private enterprise did not do much regarding pensions, so I put it in the same category. But private enterprise is in the past. It is no good going into the past. I am looking to the future.
I was interested to learn that we have a British Railways Bill every year. This will provide me with a wonderful opportunity. I shall be on the same track on every Bill until I am sure that these matters, in which I take a great interest, have been properly dealt with by the Railways Board.

7.50 p.m.

Mr. David Stoddart: I congratulate the hon. Member for Tyne-mouth (Dame Irene Ward) on her ingenuity in raising the points that she has on the Bill. She has taught me a good lesson. I also congratulate her on her continuing fight on behalf of railway super annuitants. I represent a railway town, although that glory is fast fading from Swindon. The hon. Lady said that she would have preferred to be discussing the other great events of the afternoon, but, as one of my hon. Friends said to me, Parliament is like an elephant—it has a sensitive trunk which can move a boulder or pick up a pin. It is a good thing that this Parliament can deal with great matters of state and the lives of individuals who are affected by the actions of great corporations or the Government.
The hon. Lady rightly spoke of railway super annuitants in glowing terms. Operational and workshop staff alike have given marathon service to the railways and the country. They deserved much better treatment from the Railways Board than they have had up to now. I am concerned with people who are still employed by the board, at least for the time being, in my constituency.
Swindon has a great history as a railway workshop town. It was in Swindon that the great King George V engine was built, where Brunel built his great workshops for the Great Western Railway. Only a few years ago about 13,000 people were employed in the workshops doing a fine job. That number has been reduced to about 3,500, and it is to be further reduced from September by a further 1,300 through the closing of the locomotive workshops.
I am very concerned about this, and I am not sure that it should be done. I am not sure that the board has considered the whole matter in its proper perspective or that it has made a proper projection of the future of the railways in the 1980s. Had it done so, it would have had more confidence in the railways and what they mean to this country than the closing down of the Swindon workshops, putting 1,300 men on the dole, suggests.
These 1,300 people are highly skilled, responsible and stable people, many of whom have given a lifetime of service to the Great Western Railway and then to British Railways. They are now being thrown out of the workshops in which they have worked all their lives. I have tried to impress on the Chairman of the Railways Board the importance of the Swindon workshops and the need to ensure that railway engine maintenance goes on in them. I have urged him to bear in mind that when labour is taken on in some other parts of the country there should be more work sharing to ensure that our workshops, which are very well equipped, continue to maintain locomotives on a reasonable basis, and show good additional employment for the town, and keep highly skilled people employed in the workshops.
So far, however, my appeals have fallen on deaf ears. We have reached not just the eleventh hour but almost the twelfth, but I am still hoping that reason will pre-

vail at the headquarters of the British Railways Board, so that some further hope can be held out to my constituents that they will continue to be employed and will still be able to maintain the new locomotives on the Western Region.
There is a great future for the railways. They have been going through difficult times. The growth in private car travel has had an effect on their revenue, but if we are to concern ourselves more and more with environmental questions, the railways have a great part to play. They will be carrying not less traffic but a lot more.
It appals to me to think that the Railways Board should now be turning away traffic which it could easily carry. It would be possible for it to convey car bodies between Swindon and Oxford. I understand that the British Leyland Motor Corporation would be very happy for this traffic to be carried, but the board does not want it because its computers or its accountants say that it does not pay. So these car bodies are going by road, congesting towns in Wiltshire, Berkshire and Oxford shire. Eventually, the taxpayer and the motorist and all of us will have to build new roads to accommodate this traffic which could go by rail. This is crazy. It is economics gone completely and utterly mad.
I hope that the Railways Board can extend its thinking. It may have to press Ministers, of whatever political colour, very hard indeed. It might have to educate Ministers into realising that we need not just a railways policy or a roads policy thought out in isolation but a transportation policy which takes into account the transport needs of goods and people in the country and also the facilities which road and rail can give. It is sometimes wise to get tough with Ministers.
It is well known that the railways operate under difficult and unfair financial circumstances. Heavy lorries are greatly subsidised by the taxpayer and private motorist, whereas the railways must pay the full cost of maintaining the permanent way, signalling and policing. These items place a heavy charge on the railways, and this is why they cannot easily compete with subsidised road traffic.
We should be thinking deeply at this time about these problems. The British


Railways Board should be giving a lead and putting these points forward on every possible occasion. It should be shouting them into the ears of the responsible Ministers. I have written to the Minister of Transport suggesting that if the railways are to be made viable and play a continuing part in our transportation system, as well as helping to protect the environment, the right hon. Gentleman should do his best to relieve the board of some of the heavy costs involved of maintaining the permanent way, signalling and policing activities of the railways.
If the Government were prepared to take over the maintenance of the permanent way and these other activities—in other words, do what they are prepared to subsidise on the roads—the British Railways Board would be able to carry goods and passengers on a really competitive basis. The railways could then become very competitive indeed. They would be able to provide the calibre of services which the hon. Lady the Member for Tynemouth is anxious to see, and people would want to travel by rail.
It is not only in this country that the railways are going through a difficult time. Throughout Europe, the United States and Canada the railways are experiencing difficulties. On the Continent, however, they are adopting some new thinking towards the railways. For example, private firms are being invited to establish sidings of their own with government assistance. Imaginative ideas of this kind encourage the transportation of goods by rail. My impression is that the British Railways Board is frightened of the Minister, and I do not know why. After all, he can only say "No". The board should put its difficulties and ideas forward in a strong fashion.
The hon. Member for Abingdon (Mr. Neave) spoke succinctly about the problems being faced in his constituency generally and by one constituent in particular. I agree that it is intolerable that people should be overriden in the way he described. They should be consulted by the appropriate authority in a matter as important as the one he raised.
I recognise that British Railways want to improve their services as part of the process of becoming really competitive. However, they and the other appropriate authorities must take account of the interest of the public, even if this means

receiving assistance from the Government. I trust that the facilities which the hon. Member for Abingdon requested will be made available.
I shall not attempt to block this Bill. The railways have a job to do, and I will do my best to help them do it. I hope that they will take encouragement from the fact that some hon. Members are interested in the railways and their problems. If that is so, and if heed is taken of the remarks of hon. Members, this debate will have served a useful purpose.

8.6 p.m.

The Under-Secretary of State for the Environment (Mr. Eldon Griffiths): As hon. Members have made clear, we are debating a Private Bill. This does not involve the direct responsibility of the Government, but the House may find it helpful if I briefly indicate where the Government stand on this Measure.
In doing this I trust that hon. Members will acquit me of any discourtesy if I do not—it would be improper for me to do so—deal with the various points that they have made, save to say that I am sure that the British Railways Board in its meticulous way will have regard to the remarks of my hon. Friend the Member for Abingdon (Mr. Neave) in respect of the railway crossings with which he was concerned; that the chairman of the board will, as I am sure he always does, want to take note of everything that was said by my hon. Friend the Member for Tynemouth (Dame Irene Ward)—I shall be pleased, if I do not infringe on my neutrality in this matter, to send Mr. Marsh a copy of the OFFICIAL REPORT containing my hon. Friend's remarks so that he misses none of their special flavour; and that the points made by the hon. Member for Swindon (Mr. David Stoddart) will have been noted.
My Department has studied the provisions of the Bill, which was deposited last November, and we have raised some points with the promoters. As is customary, my right hon. Friend will in due course be making a report to the Committee to which the Bill will be referred if, as I hope, it is given a Second Reading tonight. There is now nothing of importance between my Department and the promoters. I expect that the report


will indicate that the Secretary of State has no objection to anything proposed in the Bill.
Apart from containing the sort of powers that frequently appear in British Railways Bills—to authorise new work, to alter the status of level crossings and so on—this Measure includes a few more complicated provisions, in particular the Clauses relating to powers of arrest and superannuation.
The justification for these Clauses cannot be properly examined here on the Floor of the House, so I recommend that we follow the convention of Private Bills of giving this one a Second Reading so that it may be studied more carefully in Committee with the benefit of evidence from expert witnesses.
Perhaps it would be helpful if I made a few general points on the whole subject. The British public and hon. Members often display a certain Jekyll and Hyde approach to the railways. At heart, we are deeply fond of them, remembering with pride that Britain pioneered the Railway Age; and clutching to our memories of the splendid old steam trains. At the same time we are frequently exasperated, sometimes perhaps unfairly, by our experiences with British Rail. It only take a long wait for the 8.06, or a dirty waiting room, or a litter-strewn main line station to turn fondness to frustrated anger.
Both these attitudes to railways are being sharpened by events. Our fondness for the railways is increased by a growing desire to protect the environment from the impact of the motor vehicle, a point very fairly made by the hon. Member for Swindon. Our exasperation over the railways is heightened by higher fares and higher losses.
But of one thing I am certain: Britain needs—it cannot do without—a viable railway system. How big it should be, how much it should cost, what share of the expense should be borne by the user, the taxpayer and the rate paper are questions to which my Department and the British Railways Board are giving their close attention. But, looking further ahead, there are three good reason for

believing that the railways can have a good future, provided that they remain competitive in the transport market.
The first reason is technology. The inter-city trains are doing well; and there has been a welcome improvement in freight-liner traffic, especially on the maritime services. There is now opening up an exciting railway prospect in the advanced passenger train, which by the late 1970s will cut the journey time from London to Glasgow from 5½ to 4 hours. This will materially increase the railways' competitiveness with both road and air. British Rail are well placed to stay in the van of technical progress because at their Derby Technical Centre they have possibly the best railway research organisation in the western world.
The second reason for believing in the railways' future is the environment. Slowly but surely we are coming to recognise that the railways can offer a lot of attractions to areas and to people afflicted by the noise, fumes and congestion of the motor vehicle. It is far too simple to say that road freight should just be transferred to rail: far better, in my opinion, to have a liberal transport policy whereby the customer can decide which mode of transport is to be used. Yet in the long term I believe that the environment card will prove a strong one for the railways.
Third, there is Europe. As our trade with the Community increases, I see no reason why the railways should not win what I am told is described as a valuable "piece of the action". If, as is quite possible, a Channel Tunnel were to be built, the railways of tomorrow would be able to offer high-speed services all the way from Bristol to Dusseldorf, and Birmingham to Milan and points south. The potential network available to British Railways can thereby be multiplied several times in Europe.
So, while repeating that this is a Private Bill, I very much hope that the House will give it a Second Reading so that the detailed points within it may be examined very carefully in Committee.

Question put and agreed to.

Bill accordingly read a Second time and committed.

Orders of the Day — CONSOLIDATED FUND (No. 2) BILL

Considered in Committee; reported without Amendment.

Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 93 (Consolidated Fund Bills), and agreed to.

Bill accordingly read the Third time and passed.

Orders of the Day — COAL INDUSTRY

8.15 p.m.

The Under-Secretary of State for Trade and Industry (Mr. Nicholas Ridley): I beg to move,
That the Coal Industry (Accumulated Deficit) Order 1972, a draft of which was laid before this House on 6th March, be approved.

Mr. Deputy Speaker (Mr. E. L. Mallalieu): Does the hon. Gentleman wish to discuss at the same time the following Motion:
That the Coal Industry (Borrowing Powers) Order 1972, a draft of which was laid before this House on 6th March, be approved?

Mr. Ridley: It would be convenient to discuss both Motions together, although each could be put separately at the end of the debate.
The last financial year of the National Coal Board ended on the last Saturday in March, 1971, and gave the board a profit of about £500,000. Up to November, 1971, the National Coal Board saw a good chance of breaking even in the financial year 1971–72. But then we had the overtime ban, and then the strike, which changed the prospects dramatically. The deficit at the beginning of the financial year, which was 28th March, 1971, was about £34 million. The expected deficit of the board at 25th March this year, when this financial year comes to an end, might be about £200 million. That is a very rough guess, because it is impossible to be precise; and even when the figure is determined it will have to be audited, so it will be some time before the exact figure is known.
As has already been announced, the Government intend to meet this massive deficit in a mixture of ways. We have to keep the board legal, and at present the board's statutory limit for deficit is £75 million only, so in order to meet that £200 million the Government have made a grant of £100 million, which was the subject of last night's debate. Secondly, they have decided to raise the deficit level from £75 million to £100 million. This raising, in the first order that we are discussing, is made under the Coal Industry Act, 1971. This should bring the National Coal Board within its legal limit on 25th March. But one cannot be sure that it will be adequate until the accounts are finalised. However.


there is every indication that it will be adequate. Lastly, the Government have decided to increase the borrowing limit from £900 million to £950 million. I shall say more about that shortly. As the House knows, we have already agreed to increases in the price of coal of 7½per cent., which will yield about £55 million to £60 million in a full year. This is all to deal with the immediate position.
The longer-term position, which we discussed last night, is not at all certain. Greater costs will be incurred by the board than the coal price increases will bring in. There are also longer-term financial and capital problems which, as I said last night, the Government will deal with as soon as possible, but not at this stage. These are only short-term measures and we intend both to review fuel policy urgently—echoing what I said last night—and to reconstruct the capital finances of the board in the light of the new fuel policy, when it is determined. Legislation will be needed in due course for the latter objective.
From the figures that I have given the House may reflect on the cost of the strike and on the threat to the competitive position of coal which the strike has created. We now have to pay for the events of the last few months. The borrowing order increases the limit from £900 million to £950 million. That is more of a precautionary measure. The board's borrowing at the present time is under £900 million, but the Government thought it convenient to discuss this at the same time, because it was quite likely that if coal stocks increase in the summer, when they usually build up, the board might have to finance greater stocks than at the present time. This could take them over the £900 million. As a precautionary measure, therefore, the Government have decided to bring in the order increasing the borrowing limits of the Coal Board to the maximum.

8.22 p.m.

Mr. Eric G. Varley: The two orders arise directly as a result of the miners' seven-week strike and the overtime ban which preceded it. The Under-Secretary has given us the usual outline of what the orders contain and we are grateful for that, but he was a little coy about some of the real reasons

behind them. The orders would never have been necessary had the Government not been determined to promote the confrontation with the miners. It was a confrontation which most hon. Members on this side of the House and some hon. Members opposite—including the hon. Member for Cannock (Mr. Cormack) who I see here tonight, and who played a significant part in the debates on the strike—warned the Government at the time they could not win. The raising of the limit on the accumulated deficit and the increase in borrowing powers, as well as the outright grant of £100 million, are needed—as the Minister admitted in last night's debate—to help clear up the debris after the strike. It was a strike that the miners did not want, and one that some of us on this side of the House think the Government unnecessarily provoked and, in certain respects, actually thirsted for.
It is ironic, therefore, that the miners should come out of it with a record pay increase while the Government have been forced to stand all their previous policies on their heads. We are now having to foot the bill for that folly. In the three weeks since the end of the strike all the parties concerned have behaved characteristically. The miners have buckled down to their job and overall production has already reached 90 per cent. of what it was before the dispute. In some areas output has actually been higher than normal. The miners have shown in a practical way their faith in the future of the industry to which so many of them have devoted their lives.
The Tory back benchers have learned nothing from the dispute. Here again, I exempt the hon. Member for Cannock. The Government certainly propelled themselves into this self-inflicted punishment, and we have heard hon. Members opposite, representing traditional mining valleys like Chertsey and Torquay, urging the Government to shut down pits and throw men out of work. For their part, the Government have behaved equally characteristically and have instituted a review. They realise that the orders and the £100 million grant can only be a palliative, and that the long-term policy of the coal industry needs to be sorted out.
The orders, as the Minister will be ready to agree, are only stop-gap


measures. The long-term financial position has to be dealt with. The Secretary of State has acknowledged this, as did the Under-Secretary a few moments ago. The Secretary of State said:
The Government intend in due course to introduce legislation to deal with the financial problems of the coal industry."—[OFFICIAL REPORT, 6th March, 1972; Vol. 832, c. 1033.]
May we take it that the Government and the Coal Board are now urgently discussing these matters? Can we be assured that the National Union of Mine-workers is also being consulted? It would not be satisfactory for these basic issues to be settled over the heads of the representatives of those who work in the industry. The N.U.M. has views on these matters and it has done research and is entitled to be consulted.

Mr. Ridley: To which matters is the hon. Member referring?

Mr. Varley: I was referring to the question of capital reconstruction and to the Secretary of State's undertaking that the Government intend in due course to introduce legislation about the financial problems. I want to know whether the N.U.M. is being consulted about the framing of the legislation. I am pleased to see my hon. Friend the Member for Midlothian (Mr. Eadie) here, because he is a member of the Executive Committee of the N.U.M. and also has views on these matters.
The issues that arise out of these orders were fairly summarised by the Under-secretary and by the Secretary of State. They concern energy policy, employment, and employment in the assisted areas. It is on those criteria that discussions about the future of the coal industry must be made, and not on narrow, pettifogging, bookkeeper's rules—still less on motives of revenge.
I acquit the Government, certainly at this stage, of seeking revenge, but the events of the last few days have seemed to indicate that some hon. Members on the Government side appear to be in a vengeful mood. During the past 10 days we have had a debate on a Private Member's Motion moved by the hon. Member for Harborough (Mr. Farr). The matters were raised at Question Time yesterday and there was a debate initiated last night by my hon. Friend the Member for Fife, West (Mr. William Hamilton).
Minister after Minister has acknowledged that coal is basic to the country's energy needs. Minister after Minister has shot down suggestions from hon. Members opposite that other fuels could be substituted for coal as part of the long-term policy.
If anyone should feel that there is an easy way of running down the coal industry, I must point out that natural gas is limited, on known supply, to 20 years. Nuclear energy, as the hon. Member for Worcestershire, South (Sir G. Nabarro) said at Question Time yesterday, is basically unreliable at this stage, and is an expensive gamble. It is right that it should be further developed, and we support that, but it is a question of doing it realistically and putting it in its proper context. North Sea oil is coming, and we welcome it, but there is not enough to meet the projected increase in oil consumption. Sir David Barran, who should know if anybody does, has said that winning it is as expensive as a moon shot. As for imported oil, Mr. Derek Ezra summed up the position in an article in the Daily Express on 17th March, in which he said:
Last year almost half our entire energy needs came from abroad. This burden on our balance of payments could grow as the oil-producing countries demand a bigger share of the profits and a bigger say in its distribution—which is precisely what they are doing at this very moment.
It was foolish of the Under-Secretary to imply last night that indigenous coal supplies are no more reliable than imported oil. I need not quote what he said, but he gave that impression. The fact is that there are 100 years' supply of coal available, at the present consumption rate. It is there, ready to be won. Hard-working men who have been involved in only one official dispute in 46 years are ready to mine it. It was wrong-headed of the Minister, even by implication, to compare reliable British miners with the capricious oil sheikhs of the Middle East.
The other two aspects mentioned in the statement of the Secretary of State which foreshadowed the orders were the employment provided in the coal industry and the areas in which it is located. In his Budget Statement the Chancellor announced proposals on regional policy. They will be studied with great care and


debated at the appropriate time. We shall not crow too much about the Government's acrobatics on investment grants. But the value of the proposals will be cancelled out if the Government do not ensure long-term employment prospects for the coal industry, 70 per cent. of which lies in the areas that the Government profess to wish to help.
We on this side are content to let the orders go through, but we make it plain that they are only stop-gap measures, which were made necessary by the Government's mishandling of the coal dispute. The National Coal Board will have to pay increased interest charges as a result of both orders, and that will add to its burdens, so the sooner the Government present a Bill to deal with the overall financing of the board the better.
Can the Minister say whether the legislation that he foreshadowed will come in this Session or the next? The sooner the board and the miners can get down to their job the better. We trust that as a result of the lesson the Government should have learnt from the dispute they have now expunged from their ideological dictionary the word "confrontation".

8.33 p.m.

Mr. Patrick Cormack: I do not wish to make a long speech, particularly after what has happened today. But, as the hon. Member for Chesterfield (Mr. Varley) was kind enough to refer to me and previous contributions I have made, I should like to say that I hope that after tonight we shall not have to debate the coal strike in the House any more. Obviously, it must be referred to tonight, because we are in effect counting the cost and authorising payment to meet that cost.
Many of us on the Government side as well as on the Opposition side felt that certain mistakes were made by both sides in the period leading up to the strike. I do not absolve anyone. The hon. Member for Chesterfield knows that I was calling for an inquiry for a very long time. My right hon. Friend the Secretary of State for Employment made it plain as early as 24th January that he was willing to have an inquiry. Many of us will always regret that the offer was

not taken up earlier, that the court of inquiry was not held and a settlement reached long before it was.
The dispute was very costly, and the nation must now meet the cost. I hope that we shall all learn lessons as a result of the dispute. The lesson not only to the workers in the mining industry but to all workers in all industries is that a long stoppage, whatever the results at the end of the day in terms of increased salary and pay, is damaging and dangerous There can be no doubt about that. On the other hand, one hopes that we shall all realise that, although the industry has been damaged and endangered, it has not been killed, and that there is an essential future for it in this country, certainly to the end of this century and probably beyond. We read in the papers stories of other discoveries around our coasts, but this is our main indigenous fuel, and will remain so for a long time.
I hope that the Government will not be panicked by anyone anywhere into taking ill-considered action in regard to the future of the industry. Now that the miners have got their settlement—which I feel was a just one—and have the extra money, I am sure that they will play their part. The National Coal Board and the Government must play theirs, too, by showing that the industry has a proper and secure future. All this demands cooperation and sensitivity on all sides—qualities which were not always displayed during the dispute but which will be sorely needed in the months and years ahead. I should like to think that my right hon. Friend the Secretary of State will fairly soon produce a White Paper on the future of the industry which can be laid before the House and debated, indicating the rôle which he feels the industry can play in the remaining decades of this century.
I very much hope that the workers in the industry will do what they can to recoup the enormous cost with which the nation is faced. I was glad to hear the hon. Member for Chesterfield refer to the fact that in many cases production is back to 90 per cent., or even more, of what it was before the dispute. Let us hope that within a matter of months it will be 120 per cent., and that we can have the increased productivity that will justify the struggle that we all face.
We must approve these orders tonight. There can be no question of not approving them. This is a national necessity and a national obligation.
I close as I began, by saying that I sincerely hope that recrimination is now over, that the past will be forgotten and a constructive approach adopted by all sides, and that the coal strike of 1972 will not be dragged into our debates any more, because only in that way shall we benefit the industry and the nation.

8.38 p.m.

Mr. Alex Eadie: I do not want to get on to a different tack from that of the hon. Member for Cannock (Mr. Cormack). He spoke with moderation, as he did during the whole dispute. It is only necessary to say that if there happened to be the danger of pneumoconiosis on the benches opposite when speaking about coal some of us on this side of the House would have to speak about it, and about the danger of catching the disease, which would be a hazard for a Member of Parliament.
I do not want to be churlish, or to imply that the hon. Member has behaved in the same way as some of his hon. Friends have over this matter. In dealing with the cost of the recent dispute not everyone adopted his approach. He said that this is the price of Wilberforce. I wish that some of his hon. Friends had had the temerity to be a little more generous as a result of the Wilberforce findings. Some of us on this side of the House are getting a little worried about the reaction of some of his hon. Friends to Wilberforce. They seem to think that the recommendations as a result of the inquiry were too generous to the miners. That was the implication of some of the things that they have said. I do not want to repeat my speech in yesterday's debate, but this attitude does worry me because I have been a professional negotiator. I like to negotiate and to settle on the basis of negotiation. The action being taken by some hon. Members opposite to undermine the implications of the Wilberforce settlement is doing damage throughout the industry. I hope the hon. Gentleman will be able to persuade them that they were defeated by, may be, better men, that they should accept the implications and that this was a fair and just settlement.
The result of the strike was a severe cost to the nation. But some of us warned what would happen. No one can say that not many hon. Members on this side of the House tried to impress this fact both publicly and privately on members of the Government. We tried to get them to understand the implications of allowing this industrial action to proceed. We pointed out the damage that it would do to the nation, and the cost is now before us in these orders.
But the strike has also been costly to the miners. Few people speak about that. Many thousands of miners this years will not get holidays; their bairns will not be so well clad as before. When people go out on strike for seven weeks, they do so at a personal cost, irrespective of social security. Debts have been accumulated, and they all have to be paid back. Many miners have had to make great sacrifices for their cause.
The Under-Secretary of State spoke with a certain amount of moderation. He said that he did not want to add to what he told the House yesterday about the cost and that there had to be a review. My hon. Friend the Member for Chesterfield (Mr. Varley) referred to the fact that I am a member of the National Executive of the National Union of Mine-workers. I took part in the negotiations throughout, sometimes in anger, sometimes in sorrow—more in sorrow at times than in anger. I hope that the hon. Gentleman will take up the suggestion made by my hon. Friend about consultation. If we are to talk about financial reconstruction and getting the industry back on its feet. I hope that merely informing the National Executive of the Union will not be regarded as a substitute for consultation. There should be a consultation.
No one can say that the miners have never had the nation at heart. This was the first national industrial dispute in the mining industry for over 40 years. That record shows a certain amount of responsibility—and there have been times during that period when the miners, if they had not had a national consciousness and a pride in their country, could have held the nation to ransom. They chose not to do so. I hope that there will be consultation between the N.U.M. and the Department on the whole question of a fuel review and the financial reconstruction. This would profit not only the


Government but the nation and the miners as well.
My hon. Friend mentioned an additional factor, which is related to some extent to the Budget. This is the question of trying to find new jobs. The hon. Gentleman last night mentioned that in talking about the mining industry we are talking also about employment in certain areas. He said that the manpower employed in development areas in the coalmining industry totalled 115,000. I thought, listening to him, that he had said 116,000, but Hansard gives the figure as 115,000. If we are to talk about a reconstruction of the industry and the capital cost it would be irresponsible of the Government not to think of the 115,000 people who work in this industry in development areas. I hope that the hon. Gentleman will bear this in mind because this is important for everyone. We have tried, with varying degrees of success, to point out to the Government the great danger there is in contracting the mining industry. We have tried to impress upon the Government that energy demands are not contracting. This is an expanding industry, and when we have an indigenous resource which we can use as we wish, it is criminal to ignore it, particularly when we sacrifice men in doing so.
We take exception to those who say that mining is a dirty and dangerous job, because we know that already. We take exception to those who say it would be better if miners worked in other industries. That is all very well, but where are those other industries? When people talk like that they do not have any alternative to put forward. For many years to come men will have to work down the mines. For many the alternative at present is unemployment.
Before I came into the Chamber tonight I was reading some literature dealing with power matters, and I discovered that there is a shortage of natural gas in France. Hon. Members who talk about new sources of energy replacing coal should realise that they could jeopardise our whole energy future. I am concerned about our energy requirements, and I hope that the Minister will accept some of the suggestions which I have made as constructively as I can. There should be the maximum of consultation between the Ministry and the

N.U.M. In that way the nation can profit.

8.47 p.m.

Mr. Edward Milne: This is the third debate on the coal industry that we have had in the last eight parliamentary days, and the possibility of repetition looms large. I apologise for not being present to hear the Minister introduce these orders; another engagement prevented my being here. I do not mean to be disrespectful to the hon. Gentleman—I am sure that he will agree—when I say that there is not much new to be said about this. Everyone agrees that the Government and the country must bear the cost involved in trying to bring the living standards of the miners nearer to that to which they are entitled. We must restate our requests made on the last two occasions, and must not conveniently forget the problems of the industry, of the fuel economy and of our energy requirements. These are with us and will remain with us for as long as we are an industrial nation.
The hon. Member for Cannock (Mr. Cormack) said that he hoped he would see in the mining industry not merely 100 per cent. but 120 per cent. of pre-strike production. I hope that when that figure is reached we shall not consider the extra 20 per cent. as merely a payment for the Wilberforce award, but will look upon it as Wilberforce did, namely, that in 12 months' time we shall have to look further ahead in regard to the wages and living standards of the mining communities. If we are merely going to pass these orders and put the Wilberforce Report into a pigeonhole all the effort, all the argument, and all the debate and discussion that have gone on since this wage claim was launched in the middle of last year will have been a waste of time and energy.
As my hon. Friend the Member for Midlothian (Mr. Eadie) so clearly and ably indicated, the energy requirements of the nation are expanding, and within the framework of that expanding demand coal is bound to have a major rôle to play. What the figure for coal production in Britain on the basis of that increased demand will be we do not know, the only definite figure we have relates to the rising demand of the nation's energy requirements. Therefore, the question that the Government and


the House have to answer is how far we shall go towards seeing that this nation has a proper fuel policy, with coal embedded in it, so that the people who work in that industry do not have to face the redundancies and closures that they have had to face for more than a decade.
Great efforts have been made by the National Union of Mineworkers and its members in agreeing to the contraction of their industry. Now that this has been achieved, and we have the Wilberforce Report as a basis from which to go forward, we can give to the industry a stability and a future that no one has dreamed of during the past 10 to 15 years. As the hon. Member for Cannock said, the closing years of this decade could see the mining industry in a stronger position in relation to the rest of industry—and in relation to its supplying of our energy requirements in a stronger position at the end of this century than at any period during it. That is why I welcome these orders, not as the complete answer to the problem but as the first of the means by which the Coal Board can get over its immediate problems and hurdles.

8.59 p.m.

Mr. Ridley: With the leave of the House, perhaps I may reply briefly to the points that have been made.
The hon. Member for Chesterfield (Mr. Varley) asked me about capital reconstruction. We are already discussing this with the National Coal Board, and in due course the National Union of Mine-workers will be consulted. I do not think the Opposition or the union can accuse myself and my hon. Friends of not having consulted them in the past about matters which concern them. It has always been our endeavour and practice to do this. But these matters are largely financial, and of a different character, and we must reserve the right to act in the way that we think best.
The hon. Gentleman asked when legislation to put the capital reconstruction into effect might appear. He must ask my right hon. Friend the Leader of the House that question, but we are hoping to press on quickly. As I said earlier, this must be tied up with the fuel policy review, and we do not want to jump too

quickly to conclusions on capital reconstruction.
The hon. Gentleman took me slightly to task on the question of the security of coal supplies. What I said last night about coal not having such a good reputation as it had for security of supply was the opinion not of the Government but of the customers. Whatever the Government may think or do, the industry has to sell its coal and its customers must have confidence that they will be able to get coal to keep their plants going and their boilers fired. To that extent it has been a loss to the coal industry that its reputation for security of supply has to some extent suffered.
Like my hon. Friend the Member for Cannock (Mr. Cormack), I hope that this incident can now be closed from the point of view of post mortem and analysis, and that we can look to the future. Perhaps this short debate should be regarded as a requiem upon the parliamentary debates of the last few months, so that we shall be able to concentrate on the future fuel policy and the part in it which coal will undoubtedly play.
In that spirit I hope that there will be no recrimination. I can say positively that the Government's reaction is not one of recrimination against the coal industry. Equally, I hope that hon. Gentlemen opposite will not be too sensitive about the comments of some of my hon. Friends. They, too, have a valid point of view. I do not agree with the hon. Member for Chesterfield that Government back benchers have learnt nothing from the dispute. Let it not equally be said that the Opposition have learned nothing from it. There are lessons to be learned on both sides. No monopoly of virtue can be claimed by either side.
I close by paying tribute to the miners—particularly to the staff and management, the managers, over men and deputies who made possible the remarkable recovery. Most remarkable of all was the week between the ending of the picketing and the resumpton of work, when 1 million tons of coal were moved. That, coupled with the high level of production which has already been achieved, shows how the many people who are involved in this great industry are coming together again to get production going and to repair the damage


which has been caused to both fuel stocks and human relations.
In passing the orders tonight, the whole House will wish the coal industry all good fortune in the future.

Question put and agreed to.

Resolved,

That the Coal Industry (Accumulated Deficit) Order, 1972, a draft of which was laid before this House on 6th March, be approved.

Resolved,

That the Coal Industry (Borrowing Powers) Order, 1972, a draft of which was laid before this House on 6th March, be approved.—[Mr. Ridley.]

Orders of the Day — ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jopling.]

Orders of the Day — ENVIRONMENTAL POLLUTION

9.0 p.m.

Mr. Leslie Spriggs: I rise to discuss a matter concerning environmental pollution and what has become known as photo-chemical smog.
First of all, I would like to deal with environmental pollution, especially as it concerns my constituency. It is a good example to take because it is a very old industrial town. If we were to look around we would find the environment effected similarly all over the country.
We all appreciate that there are many forms in which environmental pollution shows its ugly head. First, there is the air we breathe. Rivers and canals are amenities which have suffered over the years as a result of the authorities or the owners refusing to maintain or repair them. These two amenities can be made into two of the most beautiful possessions any town can have. What do we find? Very often we find that rivers and canals are used as tips for old bedsteads, old bicycles or anything that someone wishes to discard easily and cheaply without responsibility.
Then there are the roads and the development of road haulage over the last 10 to 20 years. I give the example of the occupants of houses who exist under terrible conditions created by heavy

road vehicles using roads like the Marshalls Cross Road at St. Helens. It has reached a dangerous state when people cannot live in their front rooms because of noise and vibration. At times it is much worse than others. It creates a state of depression and ill health in my constituents. I have met them to discuss these conditions. I can assure the Minister that these conditions to which I have just referred are genuinely felt by people who are ill as a result of pollution of the environment by traffic which runs so close to the houses because of the narrowness of the footpaths that when it is wet enough their small garden walls are splashed with dirt from top to bottom from the wheels of vehicles passing by. If it is dry there is a whirlwind of dust.
The worst of these evils, as far as environment is concerned, is the noise. It is a disgrace in these modern times that people who have spent a lifetime buying their houses, which they contracted to buy some 20 or 30 years ago, find that now that the house has become their own conditions have changed as far as the environment is concerned and it is difficult to exist in their own homes.
A relief road to Marshals Cross Road is planned. I wrote to the local authority to see what could be done to help my constituents, and the reply was fair and to the point. Three such schemes are planned for new roads in this great industrial town. I am told that the relief road will have to take its turn. Therefore, it will be some years before my constituents can live in peace and reasonable quiet.
At a time when we are developing efficient and clean methods of hauling freight and carrying passengers around the country—namely, on British Railways—it must be emphasised that we have the cleanest trains in the world. I have travelled on railway systems in other parts of the world, and I should like to pay a compliment to the Railways Board and its staff for their efficiency. The electrification of our railways system will go some way towards cleaning the environment, but, unfortunately, many of our railway lines and services have been withdrawn and the lines have been taken up.
I appeal to the Minister to use his good offices—since I know he has some influence with the Government and with


his right hon. Friend the Secretary of State for the Environment—to do something about the situation before it is too late.
There are other subjects to be taken into consideration in dealing with the environment, but we are reaching a stage in this country which has been reached in other countries, for example in the United States; namely, that we are experiencing photo-chemical smog. I have recently been reading various authorities on this subject, one an expert in the United States and another a scientist from Harwell. Our own scientists have now found photo-chemical smog not in towns but in the countryside.
It may be asked what exactly photochemical smog is. I have found that very few members of the public know anything about it. It is relatively unknown in the United Kingdom, and its effects may be suffered by many thousands of people before any preventive measures are taken.
I am obliged for a recent article in the Observer by the environmental correspondent of that newspaper, a Mr. Jeremny Bugler, in which his revelations appear under the heading "California style smog in Britain". Since reading that article, I have called for various reports from two separate authorities. In a recent supplementary question to the Department I wrongly designated Dr. John Reay. I have since discovered that he is, in fact, the head of the air pollution division of the Department of Trade and Industry. He did not carry out the several tests which I suggested, but he made a statement which has been mentioned in the Press. I apologise for the error contained in that supplementary question, and I thank the Minister for his letter putting me right. However, I assure Dr. Reay that many people will be interested to see just how seriously his department takes the smog problem.
There are many industrial towns and cities in this country which merit special attention, and in the interests of my constituents I call for regular tests for photochemical smog and for reports to be made available to Members of Parliament. I also call for continuous research into the dangerous effects of ozone and the possibility of broadcasting warnings to the public when ozone levels have exceeded safety levels.
A few moments ago I referred to the tests undertaken at Harwell. I understand that three scientists were concerned in them. They measured concentrations of ozone for a period of 35 days. They found evidence of photo-chemical smog in a series of tests. On six days they found ozone levels which reached or exceeded the safety levels recommended in the United States. On two of those days they found ozone above the safety level at which smog is known to cause eyes to smart—and this was in the countryside and not in a town.
Atmospheric reactions are complicated and, unless one has worked as a scientist or technician in the department which specialises in this kind of work, they can be difficult to understand. But what is certain is that because of the reports which have come out of the United States and the steps which the United States Government are taking to amend legislation to provide preventive measures in that country this is a subject which requires constant and active research in the United Kingdom.
The story begins in Los Angeles in the late 1940s when, after a great deal of research, it was found that car exhaust fumes, and so on, reacted to a strong sun and a high temperature in the atmosphere. Scientists found that this produced hydrocarbons and other organic gases, carbon monoxide, oxides of nitrogen and oxides of sulphur. Further research carried out by other scientific authorities found that in addition to the above gases the ozone caused eye irritation and interference with visibility, damage to field crops, and the cracking of rubber products.
If the time allotted to an Adjournment debate permitted, one could develop this most important subject. But I must place on record my concern for the human race as a result of air pollution. Research has found that photo-chemical smog is the cause of bronchitis, chronic eye problems and nose, throat, lung and even heart complaints. These are the results of very careful tests in the United States.
I read the reply which the Minister gave at length in the Official Report on 8th March, 1972, at column 1438. I will not read it all, because I am sure that I am nearing the limit of the time which I am allowed. The Minister does not seem to understand the importance


of getting on with the job. This appears to be a case where the Government are waiting for trouble before they act. I am asking for preventive action. The Minister does not say that he is taking action. If he reads his own words, he will see that at the end of his statement he said:
As urban air continues to become cleaner and sunlight penetrates more strongly, photochemical reactions may need closer attention. Research is continuing and I shall be watching the position closely."—[OFFICIAL REPORT, 8th March, 1972; Vol. 832, c. 1438.]
When the hon. Gentleman said "may" he disappointed me. I wanted an assurance that he would deal with the matter and would continue to do so.
We must realise that the air is man's most vital resource and that it is dangerouse to allow the motor car industry in the United Kingdom to continue without an amendment of the law signifying that it shall change its method of production so that the exhaust will deal with most of the gases to which I have referred, if not all. Yet no legislation has been brought forward to provide for these measures.
It has been proved in the past that the British motor car industry is prepared to produce a car for the American market far superior to the car that it sells in Britain. In the next few years British car manufacturers will have to fit equipment to their cars, if they hope to sell them in the United States, which will meet the requirements of United States regulations about the prevention of air pollution and photo-chemical smog. If the United States can do it, I appeal to the hon. Gentleman to see whether he can find urgent means of dealing with our own industry.
I thought when I read what the hon. Gentleman promised to put in the OFFICIAL REPORT that this was characteristic of a Government Department. But it will not do. It is wrong and dangerous not to take preventive action without delay. The Government must take power to force British car manufacturers to conform with the rigorous standards which will be enforced by the United States Government from 1975.
I hope that the Minister will be able to assure me that towns such as St. Helens will receive the attention of the inspectorate responsible for testing for photo-

chemical smog. This is essential if Members of Parliament are to keep in touch with the pollution of the environment.
I assure the hon. Gentleman that this is not the last word that he will hear from me. I have sent out to several authorities for reports on this very subject. Having found how dangerous photochemical smog is to the people of the United States, I shall give very close attention to it now that it has been found in the United Kingdom, and I appeal to the hon. Gentleman for his fullest co-operation.

9.20 p.m.

Mr. Ted Lead bitter: The Under-Secretary of State knows the interest shown only recently on both sides of the House in this very important question of pollution and the problems created by the Local Government Bill, the Committee stage of which finished only yesterday, in which his hon. Friend has had a good deal to say on the subject.
Only a few days ago the Secretary of State presented a Bill to deal with the problem of waste disposal which was brought to public notice by the dumping of cyanide containers, to the danger of the general public, and particularly children. There was no question that concern was felt on both sides. This is a non-party issue.
Both sides of the House are concerned about the three Ps—population, pollution and privacy. The Under-Secretary has shown a personal interest in the problem of pollution, which, with the major changes in technology and the rapidity of industrial activity, combined with the incapacity of our social thinking to cope, has recently grown immensely. With the great changes in computer development, the same applies to population and privacy.
Now that we know the nature of the problem, how can we translate our concern into a practical solution? As the Under-Secretary will know from the speech that I made the other night, I believe that individual Members who are trying to find a solution are inhibited by the nature of our social organisations.
My hon. Friend the Member for St. Helens (Mr. Spriggs) has raised what is probably the most important problem


with which we shall deal this Session. He presented his case reasonably modestly.
I shall not enter into the discussion of the problems of photo-chemical smog. My hon. Friend the Member for St. Helens is more knowledgeable than I am about that, and I wish to confine my remarks to general environmental pollution. In raising this subject my hon. Friend has performed a valuable service, because this is probably the most outstanding problem of our time.
Instead of mouthing our concern about the way in which we are being affected by pollution we must begin to solve in a practical way the institutional and other problems that surround this issue. We cannot criticise each other across the Floor of the House over this. This is a non-party matter, and we are all involved in its solution. We must overcome institutional barriers and accept that several Government Departments are involved. Indeed, within each Department are several groups or bodies dealing with specific aspects of the subject.
How are we to co-ordinate the work that needs to be done if we are to make inroads into this problem? Let us first accept that various Departments are involved. For example, the Ministry of Agriculture, Fisheries and Food is vitally concerned. Only the other night we were discussing the food and fisheries aspect of the problem. The Department of Industry is vitally concerned with the industrial consequences of pollution. Then there are various public bodies, like the Meteorological Office. Let us accept that we face a common enemy and, first of all, avoid the fragmentation of activities.
I recall the Prime Minister's defining the wide area of activity of the Department of the Environment. It represents quite an empire. It would be interesting to hear the Minister's views on this subject. I have a sneaking suspicion about the way in which the problem will be tackled, bearing in mind the British character. Incidentally, when one considers how other countries have gone about tackling this and similar problems one is bound to wonder whether it is wise to try to define areas too precisely.
The British character seems to be greatly related to the notion of muddling along. That is a grave disadvantage, because we are so respectable about the

problem of pollution that our mutual aid schemes, particularly in coastal areas for oil pollution—where it is an embarrassment, sometimes, to try to determine the source of pollution, either on land or at sea—are often such that the general costs of pollution are automatically placed on ratepayers and taxpayers while those responsible for that pollution are free from the charge of negligence.
Secondly, if we are not careful we shall fall into the unhealthy habit of talking too much about pollution, passing too many resolutions about it, and forgetting about the action needed to deal with it. We must preserve our parliamentary institutions and local authorities' areas of liberty to operate in the way in which they can and should but often this militates against action to deal with a problem. The Under-Secretary has sat on the Government Front Bench for hour after hour, and has addressed professional bodies around the country. I suspect that at the end of the day he must ask himself whether he is in control of events. I should say that even if I were on the Government side of the House, because individuals are not masters of their destiny.
Local authorities are passing various resolutions about pollution. The local authorities' national organisations—the rural and urban district councils and municipal authorities—all impinge on the hon. Gentleman's Department. He should ask himself how best we can arrive at a solution, bearing in mind that although a great deal has been said on this subject, and many resolutions have been passed, we have not had a breakthrough against what I call the institutional barriers. I hope that, without committing himself, the Under-Secretary will bear in mind my conclusions.
Every hon. Member has a common interest in the problem of pollution and the same applies to the other two Ps—population and privacy. Can studies be initiated to try to create a more streamlined approach to pollution? Everyone can speak in terms of increased expenditure, efficiency, rationalisation, co-ordination and co-operation. But how best can the various functions of all the Government Departments be co-ordinated under the control of the Department of the Environment? We must avoid too many people working in opposing directions


with inevitable fragmentation and, consequently, a less effective approach to the problems of pollution.
My hon. Friend the Member for St. Helens has initiated a most interesting debate, one which is probably far more important than the Budget Statement today. This matter affects the conditions in which people live. It would be worth studying these matters to determine the most effective approach to the problems of pollution which affect this country. I will not over-dramatise by saying it involves the world, because America and the Continent have their own problems. But we must attempt to exercise the maximum control possible in order to achieve the ends mentioned by my hon. Friend.

9.38 p.m.

The Under-Secretary of State for the Environment (Mr. Eldon Griffiths): I am sure that the House is indebted, not for the first time, to the hon. Member for St. Helens (Mr. Spriggs) for raising the matter of pollution and, in particular, the problems of photo-chemical smog in the United Kingdom. I will first deal with the interesting and important points that have just been made by the hon. Member for The Hartlepools (Mr. Lead-bitter). I would like to give him the assurance that the question of how institutions should be organised to tackle the problem, which is as wide as the world and as diverse as human life, is very much before us at all times.
I would have thought that the most substantial step taken in this country, and perhaps in any other, in tackling the problem was the creation of the Department of the Environment, with complete comprehensive powers across the board. My right hon. Friend the Secretary of State has a general co-ordinating responsibility for environmental pollution as it affects all Government Departments. It is right that those functional Departments, whether the Department of Trade and Industry, the Ministry of Agriculture, Fisheries and Food, or the Department of Health and Social Security, should wish to deal with those specific aspects of pollution that come under their own activities. They have the knowledge and expertise.
But within the Government my right hon. Friend and I assisting him have a

general co-ordinating responsibility, so that we can draw together all the diverse threads. That is why within my Department we have the sponsorship of all the local authorities, whose rôle is crucial, the whole of the water and sewerage industry, the Alkali Inspectorate—which touches not merely environmental questions but the whole of industry where there are emissions to air—the water and sewerage division of the Department, which deals with the effluent arising from industry, regardless of whether that be sponsored by the Department of Trade and Industry or my Department. We have the Noise Advisory Council, which is concerned with aircraft and other noise. Aircraft noise is the first interest of the Department of Trade and Industry, but the work of the council is co-ordinated within my Department. We have the Toxic Wastes Inspectorate. The hon. Gentleman was good enough to refer to the legislation that we have recently introduced. We have the benefit of the considerable technical and scientific knowledge of the Central Pollution Unit, which advises us across the whole board on this important subject. I should mention, too, the independent advice of the Royal Commission on Environmental Pollution, which looks at the whole gamut of the problem and advises my Department centrally on what is best to be done.
So the hon. Gentleman has raised an important point. Institutions do matter. But I think he will accept that, while no one will argue that we have got it right, a genuine attempt has been made to draw together the co-ordinating responsibilities within a single Department with great executive powers and a substantial budget, capable of redeployment as the Secretary of State judges right.
I turn to the points raised by the hon. Member for St. Helens, who rightly began fairly wide. He dealt with the whole range of environmental problems in south Lancashire, an area that I know well. I remember in the early years of the war being a fire-watcher in St. Helens. I know full well that it is an area which, due to historical circumstance, has more than its share of derelict land. It is close to the great River Mersey, whose condition is not so good as many of us would


wish. It has problems of air pollution—and the hon. Gentleman also drew attention to the problems of vibration and noise arising from the very heavy traffic to be found in that area.
I hope the hon. Gentleman will acquit me of any discourtesy if I do not try to deal with all the many problems that he raised. We have put in hand a radical reorganisation of the whole water industry, which I hope will make it possible, by the early 1980s, to clean up the Mersey to the sort of standards which we are now achieving in the Thames. Not so long ago I met the local authorities and the industrialists in that area with a view to agreeing on a comprehensive programme, which will cost a lot of money and take a lot of time. There is now good hope of cleaning the Mersey over a decade.
As to derelict land, substantial grants are now available to any local authority prepared to make a sensible clearance programme.
I can assure the hon. Gentleman, with regard to canals, that where the conditions are met there will be greater opportunities not only under the new water organisation which is proposed but under Operation Eyesore which my right hon. Friend announced to clean up particularly rundown neighbourhoods. There are ways in which that can be applied to an area of derelict canal to improve the environment.

Mr. Leadbitter: That is an important point. We are on the lines of agreement here. I remember that when we were dealing with the Transport Bill in 1968 there appeared to be, on both sides of the House, some reluctance about dealing with waterways—principally canals. I am afraid that we are not doing as much as we should about opening up the canals that are available to us. I wonder whether the hon. Gentleman can give an indication of the extent to which some canals which have not yet been properly opened might be made available to the general public.

Mr. Griffiths: This, in the first instance, is a matter for the British Waterways Board. It is my hope that through resources to be made available in future it will be possible to improve canals for navigation where appropriate, and also

in their amenities and environmental aspects for the community.
Coming to the question of photochemical smog, I am grateful to the hon. Member for St. Helens for the way in which he has taken the opportunity to correct the remarks which he attributed to Dr. Reay when he first raised this matter in this House. Dr. Reay, who is head of the Air Pollution Division at the Department of Trade and Industry's Warren Spring Laboratory, has never reported that photo-chemical smog in this country has reached danger levels. This misunderstanding may arise from the fact that Dr. Reay has been quite correctly quoted as saying that the Harwell report indicates that we shall now have to take seriously the photo-chemical smog problem in Britain. On that I entirely agree.
I shall try to define what it is that we are talking about. Photo-chemical reactions take place in the atmosphere quite naturally all the time, through the operation of sunlight on various substances caught in the air. This can produce the typical heat-haze which one can see on a fine summer's day. There is nothing new in this; it goes on all the time. These reactions are particularly intense when certain man-made pollutants, particularly nitrogen' oxide and hydrocarbons, are present. In the extreme, these conditions can lead to watering of the eyes, reduced visibility and irritation to the nose. These are the manifestations which the public recognise as "photo-chemical smog". Photochemical reactions are affected by meteorological conditions. They are much more likely to occur when the weather is hot and sunny and the air is stagnant. This is the reason why photo-chemical smog is particularly associated with areas such as Southern California where these conditions, particularly of temperature inversions, frequently occur. They are much less likely to occur when the weather is cool and windy and where, comparatively speaking, there is less sunshine. In other words, in the typical weather conditions, exactly the conditions which obtain for the most part in these islands.
Nevertheless, it is a fact that as we remove smoke from our air, through the successful smoke control policy, we are allowing more sunshine to get through to us. We all welcome this, but, ironically, it is the very success of clean air


policy allowing the sunshine to get through that makes the reaction more likely to take place. One indication of the intensity of photo-chemical reactions is the amount of oxidants, particularly ozone, in the atmosphere. In the particular conditions of the United States of America, levels in excess of 10 parts per 100 million have been considered evidence of photo-chemical smog formation. But the occurrence of such a level is by no means always accompanied by haze or reduced visibility and still less by smarting eyes. Indeed, high ozone levels can occur in turbulent weather conditions and on occasions when they would appear to be most unlikely.
There can be ozone but no photochemical smog. I can only say that so far I have received no reports that actual photo-chemical smog has been significant in this country. Indeed, in other work carried out by the Warren Spring Laboratory in the first half of 1971 in central London, the formation of ozone by a photo-chemical smog-type process was shown to be of negligible importance.
I turn now to the work carried out at Harwell, about which an article appeared in the journal Nature on 18th February. The object of this experiment or observation was to measure ozone concentrations. The site, as the hon. Gentleman fairly said, was a rural one, although the A34 passes the entrance. On 35 days during the period 21st June-17th August the hourly ozone concentrations varied from zero to a maximum of 11·9 parts per 100 million. A concentration of 8 parts per 100 million was exceeded for relatively short periods on six of these days, on two of which values between 10 and 11·9 parts per 100 million were recorded. In the light of the prevailing weather conditions, the scientists concerned concluded that measurable amounts of photo-chemically-produced ozone were present at this place during that period. I must point out, for comparison, that the hourly average of oxidants in Los Angeles exceeded 10 parts per 100 million on close on 50 per cent. of days during 1964–67, and reached a maximum value of 58 parts per 100 million.
The Harwell measurements, by contrast, gave readings a very long way below these figures. Therefore, I must say that, while I agree that there is cause

here for concern, and that we must pay attention to this problem, it would be wrong to set about an alarm on the matter. We welcome the Harwell work as making a significant contribution, but further work, as the hon. Gentleman rightly said, is needed. We do not know, for example, the frequency or possible geographical distribution of levels such as those observed at Harwell. It is because we are concerned that an interdepartmental working party was set up earlier this year—long before any of the newspaper headlines—to consider the future needs for air pollution monitoring as a whole.
This working party will complete its work shortly. It has already identified hydrocarbons and oxidants, including nitrogen oxides, as two of the pollutants about which more information is required. I shall be submitting the report of the working party to the Clean Air Council, whose chair I take, as soon as it is available.
The hon. Gentleman also asked what is being done to reduce the emission of the substances which give rise to the problem—namely, the oxidants, the nitrogen and the hydrocarbons, particularly from cars. He was less than fair to my Department in suggesting that no action was being taken. On the contrary, we are considering what further research may be needed beyond that already in hand, and we have in this House amended the Motor Vehicles (Construction and Use) Regulations of 1969 so as to require that every petrol-engined vehicle shall be fitted with a crankcase ventilating device whose effect is to reduce hydrocarbon emission by 25 per cent. to 30 per cent. That has been done. A further amendment will be made shortly, requiring all diesel vehicles first used on or after 1st April next year to comply with a new British Standard which will ensure that the smoke they emit, instead of being black and ugly, is virtually invisible. This British Standard is forming the basis of similar requirements being introduced throughout Europe—

Mr. Spriggs: Can the hon. Gentleman say how many vehicles have been fitted with this equipment to which he has referred?

Mr. Griffiths: The crankcase breather is a compulsory requirement for all


vehicles. For the others, the rules come in on 1st April next, and already industry is beginning to re-engine its vehicles to meet the requirements. I went up to Nuneaton to see the device being tried out at the Motor Industry Research Association. This is not theory; it is happening. It is what my Department has done. I could give the hon. Gentleman a whole series of examples of how action is being taken with motor vehicles to reduce the emission of these substances.
The hon. Gentleman is rightly concerned about the condition of the air not only over the United Kingdom as a whole but in particular in his constituency. I understand that, for I know that the atmosphere in South Lancashire is sometimes less than wholesome. One of the best things any local authority can do to help itself is to reduce the amount of smoke emitted into the atmosphere from the domestic chimney, as this is the main source of bad air in our industrial regions, much more so than industrial emissions. In St. Helens County Borough there are nine smoke

control orders covering only 46 per cent. of its total area and only 32 per cent. of its total premises. I have the greatest respect for the borough, and I know that it is conscious of the need to control industrial emissions, but I am bound to say to it, through the hon. Gentleman, that a comparison of its clean air policy with that of the country as a whole and even with the North-West shows it to be lagging behind gravely. The figures for the black areas of the North-West are 53 per cent. on acreage covered and 52 per cent. of premises covered.
I hope that the hon. Gentleman in his concern for photo-chemical smog will realise that clean air, like compassion, starts at home and that it would be helpful if St. Helens could see its way to making more smoke control orders to improve the air enjoyed by his constituents and many of my old friends who still live in the area.

Question put and agreed to.

Adjourned accordingly at three minutes to Ten o'clock.